Singapore Air confirms in talks with China Eastern

SHANGHAI/SINGAPORE, July 19 (Reuters) Singapore Airlines, the world's second-biggest airline by stock market value, said on Wednesday it was in talks with China Eastern Airlines regarding ''possible opportunities'' but had not reached a decision yet.

Sources at China Eastern said earlier on Wednesday that the Chinese carrier was looking to sell a strategic stake to Singapore Airlines, which industry players regard as one of the best-managed carriers.

Another China Eastern source familiar with the matter said talks between the two carriers had been under way for some months and that money raised from the share sale would go towards expanding China Eastern's fleet.

A spokeswoman for Singapore Air said it had not made a decision on a possible investment.

''This is part of us talking to different carriers, part of general discussions that we have with other airlines about possible opportunities in China,'' she said.

Neither of the China Eastern sources who spoke to Reuters would reveal the size of a possible deal, but company chairman Li Fenghua told state media in April that China Eastern aimed to sell at least a 20 percent stake to a foreign investor, hopefully within the year.

According to Reuters data, a 20 percent stake would be worth about US0 million.

The investment, if it goes ahead, could give China Eastern access to Singapore Airlines' extensive global network. It could also enable the carrier to better compete with its domestic rival Air China Cathay Pacific Airways agreed in June to double its stake in Air China to 20 percent.

Other Chinese airlines are also eager to bring in outside investors. China Southern Airlines Co. Ltd., the country's largest carrier by fleet size, is seeking a partner to shore up its cargo arm, and Air France KLM could be an ideal candidate, a senior company executive told Reuters this year.

China Eastern's A-shares, open to selected foreign investors, closed 1.13 percent lower, outperforming a 2.3 percent drop on the benchmark Shanghai index Singapore Air ended the session up 1.65 percent at S.30.

REUTERS VJ RK1901