Air China is in talks to acquire a controlling stake in Shandong Aviation Group, including Shandong Airlines.
The Chinese aviation behemoth currently holds a 49.4 per cent stake in the group, and 22.8 per cent in Shandong Airlines.
Shandong Aviation Group holds a 42 per cent stake in Shandong Airlines.
Air China said the transaction was at the negotiation stage and no due diligence, audit, valuation or other related works had been completed.
Air China added that there remained “significant uncertainty” as to whether the parties to the transaction would ultimately reach an agreement.
Shandong Airlines was established in 1994 and now has a Boeing 737 fleet numbering more than 130 aircraft, with hubs at Jinan and Qingdao.