China Eastern Airlines (CEA) has proposed to take over Shanghai Airlines through a share swap, Dow Jones reported citing a source familiar with the negotiations. If successful, the move would finalize what has been a drawn-out negotiation over how to best merge the two struggling airlines. According to the source, CEA will raise US$1.02 billion through a private placement to finance the merger, then swap 1.3 of its Shanghai-listed A shares for every one of Shanghai Airlines A shares. The deal would offer a 25% price premium to Shanghai Airlines stockholders. The merger is part of Beijing’s overall plan to consolidate the aviation industry, in particular the airlines, which are plagued by operational inneficiencies and debilitating price wars due to the oversupply of small operators.