SHANGHAI, Feb. 27 – Shanghai Airlines will raise a RMB1 billion capital injection through the private issuance of 222 million shares to Jinjiang International Holdings at RMB4.5 per share.

The struggling airline has been in dire straits recently; a result of a weakening travel market, the airline announced last month that it expected their net loss in 2008 to be nearly double the RMB435 million loss they reported last year.

“Judging from current operating conditions, the company expects to continue facing relatively heavy operating pressures and financial difficulties into the first quarter of 2009,” Shanghai Airlines said in a statement released by the Shanghai Stock Exchange.

The sale will increase Jinjiang’s share holdings from 7.9 percent to 23.6 percent – second only to the municipal government’s Shanghai Lianhe Investment Co. at 29.6 percent. However, the Shanghai municipal government is also the majority stock holder in Jinjiang International Holdings.

Several inside sources have reported that discussions are currently being held regarding the merger of China Eastern Airlines and Shanghai Airlines. China Eastern is one of China’s largest carriers and is also based out of Shanghai.