China Eastern Airlines said Tuesday it would complete its acquisition of Shanghai Airlines by the end of the year.

China Eastern said in July it would buy smaller rival Shanghai Air via a CNY9 billion yuan (USD$1.32 billion) share swap that would give it roughly half of the air travel market in Shanghai, China's financial hub.

Liu Shaoyong, chairman of China Eastern, told reporters that the rights issue and the transaction would be finalized by year end. "It will definitely be completed by the end of the year," Liu said, adding that the airline was open to taking in foreign strategic investors and hopes to return to profitability in 2010 after a huge reduction in losses of core operations this year.

China's airlines faced strong headwinds last year as a slowing economy hit demand for air travel, pushing the three biggest carriers into a combined loss of more than USD$4 billion.

Last month, things turned brighter for China Eastern which reported net profit of CNY23.16 million in the third quarter.

The plight of the airlines prompted Beijing to provide big cash infusions to China Eastern and China Southern Airlines.

Air China, the country's flagship carrier, has yet to receive a hand-out.

Domestic air traffic in China has resumed its normal growth pattern this year as Beijing's aggressive economic stimulus lifted consumer confidence.