Shanghai Airlines, which is scheduled to merge with China Eastern, said yesterday it is seeking to delist its shares from the Shanghai Stock Exchange.

The company's shares were suspended from trading following the notice. Shanghai Airlines was officially listed on Oct 22, 2002. The company's shares closed at 10.82 yuan last Friday, up 51.75 percent from their debut price some seven years ago.

At the end of the third quarter of 2009, total assets of Shanghai Airlines amounted to 16 billion yuan, on a debt ratio of 93.1 percent and quarterly losses of 253 million yuan. Despite the merger, Shanghai Airlines is expected to retain an independent operational license.

According to the announcement, Shanghai Airlines' shareholders can choose between accepting 1.3 China Eastern shares for each Shanghai Airlines' share, or sell their Shanghai Airlines' shares to China Eastern for 5.5 yuan each, 35 percent below the current price.

Dissenting shareholders of China Eastern can also convert their stock to cash at a rate of 5.28 yuan per share.

Analysts say most shareholders will not accept the cash option because of the substantial price discount.

The major shareholders of Shanghai Airlines, including Best Prospect Overseas Limited and Jinjiang International, have vowed to pass on the cash option.

Shanghai Airlines' shareholders that opt for the share exchange option stand to enjoy a 12 percent premium based on Friday's closing price of China Eastern shares at 6.1 yuan each.

China Eastern shares will not be available to stakeholders until the merger is completed.

After the merger, China Eastern will have a fleet of over 300 airplanes and connect 150 cities.

Ji Lijun, an analyst at Shanghai Securities, said the two combined companies would reshape the airline market. "The new China Eastern will occupy a market share second only to China Southern Airlines," Li said. "It will also benefit from the busy Beijing-Shanghai air route."