March 28, 2006, 4:28AM
By ELAINE KURTENBACH AP Business Writer
© 2006 The Associated Press

SHANGHAI, China — Two of China's newest airlines, private carriers Okay Airways and the Junyao Group, say they have agreed to share personnel, routes, marketing and management expertise as they struggle for footing in the intensely competitive, fast-growing market.

The airlines are still working out financial details of their "strategic partnership," said a spokesman for Okay Airways, who gave only his surname, Gang.

"We are going to cooperate in developing our civil aviation businesses, including introducing new aircraft models, personnel exchanges, sales and marketing," Gang said.

China's airline industry is dominated by state-run carriers, although aviation authorities have approved at least three private airlines _ including Okay and Junyao _ to begin operations, with another seven reportedly planned.

Money-losing Okay, which is based in the northern city of Tianjin, east of Beijing, began passenger services in March 2005 using one Boeing 737-900 leased from Korean Air Co., South Korea's largest passenger airline.

A spokesman for Shanghai-based Junyao Group, Wang Zhong, said his company expected to hold a controlling stake in its partnership with Okay.

"Okay will focus on freight and we will focus on passenger transport," Wang said. He said Junyao expected its new airline, called Dongbu Kuaixian, which translates roughly as "Oriental Express," to begin operations in the latter half of this year.

Reports in the state media said Junyao had registered the name "Phoenix" for its new passenger airline, but Wang said he could not confirm that.

"I'm sure our partnership will strengthen our position in the civil aviation sector," Wang said.

Junyao Group, a dairy, real estate and retailing conglomerate based in eastern China's Zhejiang Province, plans to operate regional flights from Shanghai. Since 1991 it has run charter flights between the Zhejiang city of Wenzhou, on China's southeastern coast, and the south-central city of Changsha.

State media reports said Junyao expected its alliance with Okay to help it gain a foothold in northern China.

Last month, a report said Okay expected to reach agreement soon with Korean Air on selling a stake of up to 49 percent. At the time, Korean Air's president, Lee Jong-hee, warned that the talks with Okay might collapse.

Gang said he could not comment on the status of those talks.

China's airlines carried 138 million passengers and more than 3 million tons of cargo and mail traffic in 2005, about double the amount of traffic five years earlier. China's Civil Aviation authority expects those figures to double again by 2010.