Shares in China's top three airlines surged yesterday after media reports said that their parent groups are expected to receive government cash injections to counter growing costs and slack demand.

China Southern Airlines Co, the country's biggest carrier by fleet size, rose by the 10 percent daily cap to close at 3.67 yuan (US$ 0.54), compared with a 2.22 percent gain on the benchmark Shanghai Composite Index.

China Eastern Airlines Corp, the nation's third-largest, advanced 10 percent to 3.85 yuan while Air China, the country's flagship international air carrier, also jumped 10 percent to finish at 4.65 yuan.

The central government is likely to offer a cash injection of 3 billion yuan each to the parents of China Eastern and China Southern, newspapers including the Shanghai Securities News and the Oriental Morning Post reported, citing unnamed sources.

The parents China Eastern Air Holding Co and China Southern Air Holding Co will then pass the money on to their listed units, according to the Oriental Morning Post.

The state-run parent of Air China is also reportedly seeking cash from the government. Industry sources said earlier that the central government was considering bailing out several troubled airlines but decision has yet to be made.

Officials at the three air companies all declined to comment on media reports yesterday. Calls made to the Civil Aviation Administration of China, the industry regulator, went unanswered.

The proposals to inject money into airlines are part of the central government's plan to help a raft of state-owned enterprises as it acts to bolster demand and spur growth, according to the Shanghai Securities News.

Chinese airlines posted heavy losses in the third quarter due to rising fuel costs and declining traffic. Industry analysts have expected the air transport industry to sink into the red for the entire year.

"It's an apparent signal by the government to spur growth," said Liu Yu, an Orient Securities Co trader. "With this support and easing fuel expenses, airlines may recover a bit next year although they won't experience growth as fast as before."

(Shanghai Daily November 18, 2008)