``We have contacted the Wuhan authorities, however, no final decision has been made,'' China Eastern executive director and company secretary Luo Zhuping said Wednesday. Wuhan State-owned Assets Management Commission plans to auction off its 40 percent stake in China Eastern Airlines Wuhan, and the airline's other major shareholder will have priority to buy the stake, mainland media said.

China Eastern Airlines Wuhan, formerly called Wuhan Airlines, was formed when Shanghai-based China Eastern and Junyao Group's aviation unit bought their stakes in 2002. The stake sale was a result of a state-instructed industry shakeup in which China Yunnan Airlines and China Northwest Airlines were merged into China Eastern.

China Eastern, which already holds 40 percent in the Wuhan airline, may bid against Junyao Group, which owns an 18 percent stake. Shanghai-based Junyao Group runs businesses in the aviation, dairy and property sectors.

China Eastern paid 240 million yuan (HK$230.38 million) for its 40 percent stake in 2002. Wuhan High-technology Holdings also owns 2 percent in the company, which has registered capital of 600 million yuan.

Despite rising jet fuel prices that prompted China Eastern to warn it will report a first-half loss, the mainland's airlines are expanding as they expect demand for air travel will continue to grow. China Eastern earlier this month ordered 15 aircraft from Boeing for delivery in 2008 for not more than US$120 million (HK$936 million) each. It may also buy five jets from Brazil's Embraer for US$100 million in total.

China Eastern shares fell 1.57 percent Wednesday to close at HK$1.25, extending their accumulated loss so far this year to 26.9 percent. carol.chan1@singtaonewscorp.com