SHANGHAI - China Eastern Airlines, the country's third-most valuable airline, said on 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 9 billion yuan ($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 completed by the end of the year. 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 $4 billion.

Last month, things turned brighter for China Eastern which reported net profit of 23.16 million yuan 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. (Reporting by Melanie Lee and David Lin; Editing by Jacqueline Wong)

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