Chian Eastern Airlines' two years of efforts fell to pieces yesterday as shareholders gave a resounding "nay" to a cooperation deal with Singapore Airlines.

Nearly 78 percent of H-shareholders and 94 percent of A-shareholders rejected China Eastern's bid to sell a 24 percent stake to Singapore Airlines and its parent, Temasek Holdings Pte for HK$7.16 billion (US$917.6 million) at HK$3.80 a share. The plan required approval from two-thirds of minority shareholders.

The result may clear the way for Air China's parent, China National Aviation Holding Co, which said it would offer a price of at least HK$5 a share for a stake in China Eastern if the deal failed.

"I felt disappointed about the result but we will return to the negotiation table with Singapore Airlines as we believe the carrier is the best choice for us," said China Eastern Chairman Li Fenghua.

Li said they chose SIA because of its advanced management experience rather than the price and they will take note of shareholders' calls for better performance.

China National, which owns about 10 percent of China Eastern's tradable shares, will submit a counter bid within two weeks. An official from China National said at the sidelines of yesterday's shareholder meeting that they sincerely hoped to cooperate with China Eastern and always regarded it as a well-performed company.

"Although China National said it would offer a higher price, we won't cooperate with a carrier which is at the same level with us," Li said. "We believe the Chinese government will insist on reform and opening-up and our cooperation with Singapore Airlines will finally succeed."

SIA said in an announcement to the Singapore Stock Exchange yesterday that it felt disappointed but would "continue to support the building of a relationship with China Eastern."

"Except the share exchange, Singapore Airlines and China Eastern can still cooperate in business, and no matter which carrier China Eastern chooses, it will be benefited," said Li Lei, an analyst of China Securities Co.

"The Chinese government may grant SIA more businesses or traffic rights as compensation," Li said.

Many shareholders said the price of HK$3.80 was too low but China Eastern insists that the price is reasonable.

China National previously considered making a counter offer for a stake in China Eastern with Cathay Pacific Airways Ltd, though it scrapped the plan in September. Cathay Pacific and Air China own about 17.5 percent of each other.

Cathay Pacific said on Monday that it would support renewed attempts to form a tie-up between Air China and China Eastern.