CHINA Eastern Airlines Corp, the country's third-largest carrier, fell to the lowest in 19 months in Hong Kong trading after an agreement to sell a stake to Singapore Airlines Ltd expired.
"We have lost our best opportunity to improve the company's performance and management," Board Secretary Luo Zhuping said by phone with Bloomberg News from the company's Shanghai headquarters yesterday. "We feel very disappointed as the deal could have been the best in the industry."
The airline dropped 7.9 percent to HK$1.97 (25 US cents) at the close. It has fallen for five days, losing 25 percent. Its Shanghai stock dropped by the 10-percent limit. The Singapore investment agreement expired last Saturday.
China Eastern had tried to revive the sale of a 24-percent stake to SIA and Temasek Holdings Pte since January when its minority shareholders vetoed the deal in anticipation of a higher offer from Air China Ltd. The carrier will continue seeking a strategic partner, it said in a stock exchange statement on Sunday.
"The share sale negotiations are unlikely to resume in the near future," said Li Jun, an analyst at Everbright Securities Co in Shenzhen. "It's time for airlines to retreat from expansion globally."
SIA will explore other ways of developing the relationship, it said in an e-mailed statement on Sunday. The carrier continues to be optimistic about the prospects for China's airline industry, it said.
Most of the institutional investors who voted against the SIA deal in January have since sold their China Eastern shares, according to Luo.
Chinese airlines also fell after a bomb threat last Friday against an Air China plane flying from Japan compounded fears that this month's Olympics will disrupt traffic. The threat forced one plane to turn round mid-flight and caused two other flights to be delayed as planes were searched. "This isn't a good year for airlines and their stocks," said Li. "Traffic won't rebound until the end of the Paralympics."
China has tightened visa rules, cut flights at Beijing's airport and taken other steps to boost security and ease congestion during the Olympics.
Air China, the country's largest international carrier, slumped 10 percent to 7.82 yuan (US$1.14) in Shanghai and 2.4 percent to HK$3.71 in Hong Kong.