Cathay Pacific Airways Ltd. said Tuesday it has been exploring opportunities to expand into the China market, but stopped short of confirming a media report that it may buy a stake in China Eastern Airlines Corp. (CEA).

The Chinese language weekly Economic Observer said in an unsourced report Monday that Cathay Pacific is likely to become the second largest shareholder of China Eastern.

"We don't comment on market speculation," a Cathay Pacific spokeswoman said.

"We've been interested in the Chinese market and have been looking for opportunities to extend further cooperation with the Chinese aviation industry," she said, without specifying what form of business strategy Cathay Pacific would undertake to achieve that goal.

China Eastern Company Secretary Luo Zhuping said that the company had been in contact with Hong Kong's largest carrier to explore the possibility of a stake purchase.

"We were in talks with various parties before, including Cathay Pacific, but all talks stalled because of SARS," Luo said on Thursday.

He said no such talks have been revived since the severe acute respiratory syndrome outbreak, adding interest on the company's shares became subdued as the epidemic had pushed many Chinese airlines into red.

In the first half of this year, China Eastern reported a net loss of 1.25 billion yuan (US$1=CNY8.28) under Hong Kong accounting standards, its first loss since 1998.

In the third quarter to Sept. 30, the Shanghai-based airline posted a net profit of CNY228.3 million, up from CNY96.7 million a year earlier, under Chinese accounting standards.

Under an aviation restructuring plan announced by the Civil Aviation Administration of China last year, China Eastern Airlines, Yunnan Airlines and China Northwestern Air were merged to form China Eastern Air Holding Co., China Eastern's parent.

China Eastern Airlines earlier appointed Morgan Stanley as its adviser for these acquisitions, which it had planned to complete by the end of the year.

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