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China Eastern plans to reach beyond US routes with Delta stake deal

CHINA Eastern Airlines plans to work with new investor Delta Air Lines to expand beyond American routes, said James Wang, secretary to board of directors of the Shanghai-based carrier.

Delta announced earlier that it will buy a 3.55 per cent stake in the state-owned airline for US$450 million, subject to board approval, making it the first US carrier to invest in a Chinese airline.

Delta will also get an "observer" seat on China Eastern's board.

The two airlines expect to deepen their ties on the transpacific, there is scope to work in other regions such as Europe, Mr Wang told Reuters, without providing details.

This would help grow China Eastern's international business, which accounts for 35 per cent of its revenues, he said.

"China and the US are the two biggest aviation markets in the world and the growth potential is huge," said Mr Wang.

China Eastern ordered 20 Boeing 777-300ER jets in 2012 to expand its long-haul network. Industry sources expect it to buy more widebody jets in the coming years.

The carrier operates 35 weekly departures to four US destinations from Shanghai, and plans to open new services to North America and increase frequencies on existing ones.

Delta has 28 weekly services to Shanghai and daily services to Beijing, and it said its China network has tripled in five years.

Delta's stake could spark "competitive responses", including deals between Beijing-based Air China and United Airlines, Sydney-based aviation consultancy CAPA said in a report.

Rao Xinyu, Air China's company secretary, told Reuters that the airline will "strengthen our strategy for the US market".

Cathay, which owns 20 per cent of Air China, is the only international carrier to have a stake in a Chinese airline.

Singapore Airlines and Singapore's state-owned investment firm Temasek tried unsuccessfully to buy a stake in China Eastern in 2007, but the bid fell through in early 2008.