Hong Kong, June 20, 2006 (ABN Newswire) - Air China may emerge as the only profitable airline among the three mega Chinese carriers in fiscal 2006 helped by the recent binding with Cathay Pacific, said Tai Fook Research.

The analyst was upbeat on Air China, saying it would outperform China Eastern and China Southern despite forecasting a 21 per cent fall in its bottom-line to RMB1, 906 million.

Air China will buy from Cathay Pacific's parent, Swire Pacific and CITIC Pacific a 10.2 per cent stake for HKD$5.39 billion. This follows Cathay doubling its shareholding in Air China to 20 per cent.

Tai Fook also pointed out Air China's net debt had recently jumped 27 per cent year-on-year to RMB30.7 billion at the end of fiscal 2005 following a gearing ratio of 153 per cent which it described as the lowest among the three mainland carriers.

Tai Fook has upgraded its target price on Air China to HKD$3.45 from HKD$3.20 given the recent stronger relationship with Cathay.