SHANGHAI, July 12 (Xinhua) -- China Eastern Airlines on late Sunday announced that it will merge Shanghai Airlines through a shares swap and the two will resume stock trading in Shanghai Monday.

    Shanghai Airlines will exchange one of its A shares for 1.3 shares of China Eastern after the former's shareholders are given a 25 percent risk premium, the latter said in a statement filed to the Shanghai Stock Exchange.

    Shanghai Airlines Chairman Zhou Chi said on June 30 that the transfer of shares will take about four to five months.

    Liu Jiangbo, spokesman of the working team overseeing tie-up affairs, said Shanghai Airlines will become a wholly-owned subsidiary of China Eastern and retain its brand and independent operation.

    Liu told Xinhua that the merger has entered a concrete stage after the announcement of the detailed merger plan.

    This is a major step to promote the consolidation of regional airlines and to facilitate building Shanghai into an international air and shipping hub, he said.

    The merger will give China Eastern, one of China's three state-owned airlines, about 50 percent market share in Shanghai.

    China Eastern reported a net loss of 13.9 billion yuan in 2008 because of weak travel demand in the economic downturn and wrong-way bets on fuel prices.

    China Eastern and Shanghai Airlines shares have been suspended from trading since June 8 while waiting for the merger talks. China Eastern last closed at 5.33 yuan and Shanghai Airlines closed at 5.92 yuan.

    China Eastern is listed in Hong Kong and Shanghai and Shanghai Airlines is listed in Shanghai.