Tuesday, January 8, 2008

Gounding Global Possilibities

This afternoon an interesting vote took place.

Shareholders of China Eastern Airlines were asked if they accepted a proposal by Singapore Airlines and Temasek, the Singaporean government's investment arm to buy a 24 per cent stake of China Eastern at HK$3.80 (US$0.49) a share.

Even though the sale was approved by the Chinese government, the parent company of Air China, China National Aviation Company (CNAC) put in a last minute proposal of HK$5.00 a share.

Both Singapore Airlines and CNAC are fighting over China Eastern as it's based in Shanghai, and they see the potential of creating a hub in the cosmopolitan city. There is a growing domestic air travel market in Shanghai that both companies want a stake in.

For China Eastern shareholders, the choice was a no-brainer and they rejected the Singaporean bid, claiming it was too low.

Some see the Singaporean interest in China Eastern as threatening to national economic development and look at the move as a protectionist one.

However, on the other side, China Eastern is missing a huge opportunity to become more competitive in the global travel market.

Singapore Airlines is consistently rated as one of the best in the world for its service, quality and safety.

And if China Eastern shareholders were taking a more long-term approach to their investment, they would find that Singapore Airlines management would help turn the domestic carrier into an even better one. It would also help introduce it to the global market.

In the long run that would make China Eastern worth much more than HK$5.00 a share.

But around 77.6 per cent of shareholders rejected the Singapore bid in favor of patriotism and/or short-term gain.

It's yet another troubling sign that people are only interested in today, not the future. Or they don't want globalization to take place on their turf -- leaving them behind and unable to effectively compete on the world stage without outside help.

1 comment:

ks said...

i heard air china is making another efffort to make the deal go. with time i am sure the linkup with be a reality. just look at asia mile, star alliance. that is a way to be economical and commercially competitive.