Premier Frank Hsieh also renewed a call for talks with Beijing to start direct charter flights between Taiwan and the mainland.

''We agree to discuss cargo and passenger charter flights as well as holiday or other special charters so we can make arrangements as soon as possible,'' Hsieh told a weekly cabinet meeting.

Taipei has previously said it wanted to talk about direct air cargo charters in the first stage.

In Beijing, the mainland cabinet unit dealing with Taiwan issues declined to comment on Hsieh's proposal. Civil Aviation Authority of China official Pu Zhaozhou said in February Beijing was considering allowing Taiwan's airlines to fly to Europe using its airspace, shaving two hours off the flights.

Taiwan has so far banned its carriers from flying over the mainland due to security concerns.

But Taiwan's China Airlines and EVA Airways were permitted to fly through the mainland during the US-Iraq war in 2003 because of safety considerations.

``Allowing Taiwan aircraft to fly through Chinese airspace without detours will help save flying time and costs and increase the competitiveness of the airline industry,'' Hsieh said.

Crude oil prices topped US$62 (HK$483.60) a barrel on supply worries Wednesday, testing record levels set earlier this week.

EVA Airways said using mainland airspace could save it up to NT$200 million (HK$48.8 million) in fuel costs a year and shorten flying time to Europe by at least one hour.

CAL, Taiwan's largest carrier, flies to eight destinations in Europe, while EVA flies to six. Both airlines fly to three cities in South Asia and the Middle East.

CAL said it is studying the likely effects of the changes, so it was still too early to tell how much the company could save in lower fuel costs.

``We welcome the move,'' an EVA spokeswoman said.

``The announcement fuels hopes for better relations ahead. We are encouraged by the possibility of how relations between the two sides will evolve in the future,'' said Collin Shih Cathay Securities Investment Consulting, pointing to direct air links.

Earlier this week, Hsieh said Taiwan was likely to expand direct shipping links between its offshore islands and the mainland next month.

Taiwan investors are estimated to have poured over US$100 billion into the mainland since the late 1980s.

Businesses have clamored for Taipei to allow full-blown air and shipping links to cut transportation costs. Currently, travellers and cargo must go through Hong Kong or a third country.