China Eastern in Singapore deal

Singapore is the world's largest airline by market capitalisation

Singapore Airlines and investment firm Temasek have bought a combined 24% stake in China Eastern Airlines.

Singapore will pay 4.7bn Hong Kong dollars (£298m) for a 15.7% share in the carrier, with Temasek spending 2.5bn HK$ for a 8.3% share.

China Eastern Airlines hopes the move will enable it to improve its services, as it faces stiff competition.

Shares in China Eastern surged 95% on the news. They resumed trading after being suspended following merger talks.

China Eastern is the country's third largest carrier. Temasek is the investment arm of Singapore's government.

"We are proud to be playing a growing role in China's aviation market" said Stephen Lee, Singapore Airlines' chairman.

While the aviation sector has experienced strong growth in China and analysts expect this trend to continue, rising fuel prices have dented profits.

China Eastern posted net losses in 2006 and 2005.