Shanghai Airlines, a regional carrier based in China's commercial centre, said on April 26 that it plunged into the red last year because of rising fuel prices and fierce competition.

The airline made a net loss of 435.1 million yuan (US$62 million) in 2007, compared with a profit of 9.3 million yuan in 2006, although revenues surged 23 percent to 12.3 billion yuan on the back of strong traffic growth.

Shanghai Airlines said tough price competition caused it to lose money on its new Shanghai-Hong Kong route last year, while losses at its new international air cargo subsidiary took 90 million yuan off the airline's bottom line.

"The company faced tight resource constraints during the period, especially for pilots and engineers, which severely limited the expansion of its business," it said.

Shanghai Airlines predicted fuel price and competitive pressures would remain heavy this year, but said it hoped to improve earnings by increasing efficiency and sales efforts around the time of the Beijing Olympics. Losses in the air cargo business should narrow greatly, it added.

Chinese stock investors have been speculating that Shanghai Airlines may turn to a strategic investor for help, possibly Chinese flag carrier Air China. But the two airlines denied last month that they had any intention of forming an equity tie-up.

Photograph: A Boeing 737 aircraft (Rego. Number: B-5320) operated by Shanghai Airlines at Xi'an Xianyang International Airport on January 17, 2008. Photo contributed by CARNOC.com message board member - ysltzy.