Air China is examining a possible restructuring of the sector as competition from foreign airlines and newly arisen local carriers is growing following the opening of China's civil aviation market, President Cai Jianjiang told reporters.

  "Air China will not exclude the possibility of a group restructuring with sister companies, including China Southern," Cai said, responding to market speculation that the airline would merge with China Southern.

Beijing is restructuring state-owned companies and the number of central government-controlled firms will fall sharply in coming years as they adapt to market changes and fend off competition, he added.

Air China's rivals include Shanghai Airlines, Shenzhen Airlines and Hainan Airlines.

The airline reported late on Tuesday a more than three-fold surge in first-half net profit to CNY1.57 billion yuan on strong demand and an CNY868 million foreign exchange gain on the appreciation of the yuan during the reported period.

Shares of Air China fell 4 percent on Wednesday but have gained 98 percent this year, beating a 29 percent gain on the index of Chinese companies listed in Hong Kong in the same period.

(Reuters)