Shanghai Airlines is expected to reduce capacity in its unprofitable cargo operation and expand into the South China market by establishing a second domestic base at Fushan in Guangdong Province for its subsidiary China United Airlines as it seeks to return to profit after losing CNY1.25 billion ($182.8 million) in 2008. "Our main task for this year is to survive the current difficult time," Chairman Zhou Chi said.

Fushan is a military airport. Zhou said China United has launched an airport management company in conjunction with China Aviation Supplies Import & Export Group to transform it into a civil airport. "SAL will open Shanghai to Fushan this year while China United will open Beijing to Fushan initially," with more routes to follow, he said. But he expressed concern about the pace of recovery in the domestic market. "Overcapacity remains a big problem," he warned. He revealed that SAL's load factor reached 77% in April, then dropped after the swine flu outbreak to 65% in early May.

Looking outside China, SAL has no plans to open new international long-haul routes but "won't give up the routes to neighboring countries." It launched service to Hanoi, Bali and Saipan earlier this year. In the meantime, Zhou pointed out that any merger between China Eastern Airlines and SAL won't happen in the near future, citing alternative options such as "finding a financial investor." The merger between CEA and SAL is "not the only one option," he noted.

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