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According to China Business news, the Chinese government has said that the deal has been approved in principle, Reuters reported.
Under the proposal, China Eastern would take a 60 per cent stake in its rival Shanghai Air.
China Eastern would then receive funds from the State-owned Assets Supervision and Administration Commission. The exact amount of the cash injection was not revealed.
Sources reported to Reuters that the government had been discussing the possibility of brokering a merger between two airlines based in Shanghai and that the dominant partner would receive a 60 per cent share of all domestic flights within China.
China Eastern currently has 15 flights a day to Beijing and 14 flights per day to Hong Kong.
The company began flying direct between London and Shanghai early in 2004 and the airline descirbes itself as one of the top three domestic airlines inside China.
