Air China buys China Eastern Airlines. By acquiring China Eastern Airlines, integrating route resources, especially strengthening its strength in Shanghai, Air China can improve its operational capacity, expand international routes and compete with foreign airlines. After the merger of China Eastern Airlines, Air China can reduce its competitors, reflecting the scale effect.

Because China Eastern Airlines has been facing management and financial difficulties and needs external assistance, and China Eastern Airlines is acquired, its shares may get a premium, so the small shareholders will support the merger. Air China occupies the position of the largest shareholder of China Eastern Airlines, and acquiring fewer competitors can also provide better preparations for Air China's acquisition of China Eastern Airlines.

For China Eastern Airlines, after the acquisition, China Eastern Airlines got comprehensive help in capital, management and route enjoyment, which will help China Eastern Airlines get out of the predicament as soon as possible.

However, after the acquisition of China Eastern Airlines, Air China will occupy both Beijing and Shanghai markets, and then seek China Southern Airlines in Guangzhou, which will lead to the retrogression of the domestic aviation industry competition pattern. Moreover, China Eastern Airlines has always opposed the acquisition of Air China. If the acquisition is successful, how to integrate the corporate cultures of both parties and how to allocate resources will raise many questions for Air China and China Eastern Airlines.

At present, China Eastern Airlines has received a capital injection of 3 billion yuan from the state, which makes it more difficult to acquire Air China. In addition, in order to build Shanghai into an international aviation hub port, the Shanghai Municipal Government does not want the Shanghai Airlines (4.56%, 0.00%, 0.00%) market to be controlled by Air China, which may prevent Air China from acquiring China Eastern Airlines. These are all unfavorable factors for the plan to start.

China Eastern Airlines and Shanghai Airlines merged.

China Eastern Airlines was placed in Shanghai, led by Shanghai SASAC to promote the merger of China Eastern Airlines and Shanghai Airlines. After the merger, the two sides can effectively integrate Shanghai's route resources, integrate China Eastern Airlines' huge fleet and Shanghai Airlines' excellent assets, enhance their overall strength, and compete with Air China. The merger of China Eastern Airlines and Shanghai Airlines is also in line with Shanghai's goal of promoting the construction of an international aviation hub port. During the integration period, Shanghai SASAC, as the major shareholder, will increase the capital injection for Shanghai Airlines to help China Eastern Airlines solve its financial difficulties.

However, in view of the failure experience of China Eastern Airlines in integrating Yunnan Airlines and Northwest Airlines, the prospect of cooperation between China Eastern Airlines and Shanghai Airlines may not be clear. In addition, China Eastern Airlines' current asset status is poor, and there is great uncertainty about how to integrate the resources of both parties after integration, and the merger prospect may not be as good as expected.

Judging from the possibility of starting the plan, China Eastern Airlines hopes to further consolidate its strength in Shanghai. The capital injection of 3 billion yuan also increases China Eastern Airlines' right to speak in the process of merger with Shanghai Airlines, which is promoted by Shanghai SASAC. These are all favorable factors to promote the merger between the two parties.

However, the overall strength of China Eastern Airlines is not strong at present, and the resource allocation and management after the merger between the two parties may hinder the negotiation process between the two parties. Moreover, China Eastern Airlines is an enterprise directly under the central government, and there are still uncertain factors whether it can be successfully placed in Shanghai.

Merge into an aviation holding company

China Eastern Airlines was transferred to Shanghai, and the Shanghai Municipal Government set up a holding company to promote the integration of China Eastern Airlines, Shanghai Airlines and Shanghai Airport (13.59, -0.08 and -0.59%), and organize and lead the operation of the three parties in a unified way. Doing so can maximize the concentration and mobilization of Shanghai's civil aviation resources and ensure the success of Shanghai's international aviation hub port construction. For China Eastern Airlines, it can not only enjoy the routes and customer resources of Shanghai Airlines, but also rely on the Airport Group to obtain better ground services, which will lay a huge advantage for future development, especially for stabilizing the Shanghai shipping market. Of course, this plan involves a wider scope. In addition to the characteristics of the third scheme, it will only be more difficult to start negotiations and integration after the merger.

At present, the short-term liquidity of China Eastern Airlines has been alleviated by the state's capital injection of 3 billion yuan, the asset-liability ratio has decreased by 3.77 percentage points from 98.49%, the current ratio has increased from 0.24 to 0.30, and the quick ratio has increased from 0.22 to 0.28. Although the company's financial situation has improved, the overall situation is still not optimistic. The urgent task of China Eastern Airlines is still to solve the financial difficulties, and then improve the corporate governance and management level.