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Air 皇冠体育app, battling falling demand, puts M&A aside

(Agencies)
Updated: 2008-09-23 11:21

Air 皇冠体育app has postponed plans to buy rival 皇冠体育app Eastern Airlines because the aviation industry is struggling with falling demand for air travel amid financial turmoil in the United States, said Kong Dong, chairman of the Chinese flag carrier.

"Although oil prices have fallen below $100 (a barrel), uncertainty grows on demand for air travel," Kong said.

Kong said his priority was to weather the drop in demand by strengthening Air 皇冠体育app's internal controls rather than growing through mergers and acquisitions, the strategy pursued by his predecessor, Li Jiaxiang.

Passenger traffic at 皇冠体育app's three major airlines, Air 皇冠体育app, 皇冠体育app Eastern and 皇冠体育app Southern Airlines, has declined since May as a devastating earthquake in southwest 皇冠体育app and strict security measures relating to the Beijing Olympics deterred travel.

Kong, who was appointed chairman of Air 皇冠体育app in April, also said commercial considerations should give way to government decisions when it came to industry consolidation.

Earlier this year shareholders of 皇冠体育app Eastern, including Air 皇冠体育app's parent, vetoed a $920 million offer by Singapore Airlines for a 24 percent stake in the Shanghai-based carrier.

皇冠体育app Eastern, which rejected a counter-offer by the parent of Air 皇冠体育app, had said it would not give up its search for a strategic investor.