Jun. 8 – State-owned China Eastern Airlines and Shanghai Airlines are in talks to consolidate assets in a tentative merger deal.

Although both carriers are now operating at a loss, the merger will give them control of more than half the market share in Shanghai. Shanghai Air is in a perilous situation as it in the brink of being delisted if it does not post a profit this year after two straight years of losses.

China Eastern is based in Shanghai Pudong International Airport and has a hub at Shanghai Hongqiao International Airport. A China Eastern merger with Shanghai Airlines may give it membership to Star Alliance.

Shanghai Air board secretary Xu Junmin said he was not aware of any imminent merger with China Eastern told Reuters. China Eastern executives refused to comment and added that the company would issue a statement later today.

“I am not saying that merger is a cure-all, but at least it gives them a chance to work together rather than fighting with each other especially at a time like this,” said Li Lei, an analyst with China Securities Co. told Reuters.