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No stake offered to Singapore Air: CAL

China Airlines Ltd (CAL, 中華航空) shares rose sharply yesterday amid rumors that it had offered a 25 percent stake to Singapore Airlines Ltd, although CAL later denied the claim. Share prices also gained after the airline confirmed it has begun to raise ticket prices on major international routes because of soaring fuel costs.

CAL shares closed limit-up at NT$18.7 (US$0.60) on the Taiwan Stock Exchange. CAL has seen its stock price jump 24.26 percent since the Jan. 12 legislative polls.

"Singapore Airlines has not contacted with us [about a stake purchase] ... this was simply a market rumor," CAL spokesman Bruce Chen (陳鵬宇) said in a phone call.

Earlier yesterday, chairman Ringo Chao (趙國帥) had told a press gathering that he wasn't aware of the reported stake sale. But he did say higher fuel prices and a slowing US economy were having an impact.

"We are considering dropping certain unprofitable cargo destinations in a bid to cut costs," he said.

The airline raised ticket prices by an average of 10 percent as of this month, Chen said.

CAL posted a record NT$127 billion in revenues last year, a 4.1 percent increase over 2006, it said.

CAL shares are expected to rise as investors have increased their exposure to the aviation sector, betting on a new government after the March 22 presidential elections will expand transportation links with China.

Merrill Lynch said in a client note last Friday that CAL would have a 3 percent upside potential, while rival EVA Airways Corp (長榮航空) will see share prices rise by 8 percent.

EVA shares rose 4.97 percent to NT$19 yesterday.
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