'Starting June 8, China Eastern and Shanghai Airlines officially began their restructuring procedures,' said Liu Jiangbo, a China Eastern spokesman, according to Xinhua news agency on late Monday.

He declined to provide any further details, according to Xinhua.

Shares in China Eastern Airlines and Shanghai Airlines were suspended Monday amid media reports that the government had ordered the two ailing carriers to merge. They remained suspended Tuesday.

China Eastern said in a statement to the Hong Kong Stock Exchange that it was 'in the course of planning matters in connection with the material restructuring relating to the company,' but gave no further information.

Xinhua cited unnamed analysts as saying the merger would give the new group a 50 per cent market share in Shanghai, the headquarters for the two carriers.

This would help the combined carrier to become more competitive over its major rivals, Air China and China Southern Airlines, according to Xinhua.

Like many carriers, both China Eastern and Shanghai Airlines reported losses last year and were already facing troubles before the worst repercussions of the global financial crisis hit China's economy. -- AFP, AP