The mainland's largest freight carrier Air China Ltd said yesterday it would not rule out the possibility of merging with rivals including China Southern Airlines to raise its competitiveness.

Air China President Cai Jianjiang made the remarks in response to speculation that the country's three largest airlines might be restructured.

Cai said the mainland's aviation industry is looking into the issue, "but we have yet to make a submission to the central government to express our view".

A string of small State-owned and central government-controlled airlines are being restructured in an effort to fend off competition from outsiders. Against that backdrop, rumors are flying that the three largest airlines will be restructured.

Air China on Tuesday posted a 1.5 billion yuan net profit in the first half of the year, a year-on-year increase of 240 percent, while its operating revenue rose 17.17 percent to 23.3 billion yuan.

Li Jiaxing, Air China's chairman, attributed the growth to accelerating demand for air travel that effectively mitigated the negative effect of increased fuel costs.

Fan Cheng, the company's executive director and chief financial officer, said the hedging ratio of fuel was at 40 percent during the period. He stressed that the company would continue to adopt fuel-saving strategies to minimize the impact of oil price fluctuation.

Fan said oil prices would hoves around $75 per barrel in the second half. He said Air China would change its freight routes and hedge oil prices to combat the higher cost.

Air China has launched about 700 Olympics products and has posted 158 million yuan in sales revenue. Its income is expected to reach 580 million yuan during the Olympic Games next year.

Cai said the operation and debt ratio of China Eastern Airlines will be substantially enhanced by Singapore Airlines buying a stake in the carrier.

But he said the purchase would not affect Air China's strategies in the eastern region.

Air China holds 53 percent and 43.8 percent of the cargo and passenger markets in Beijing, which it expects to increase to 55 to 60 percent for cargo and 45 to 50 percent for passengers by 2010.

(China Daily August 30, 2007)