China National Aviation Corporation (CNAC), the parent company of the mainland's largest airline Air China, said yesterday it would not submit a detailed proposal unless China Eastern Airlines (CEA) was ready to sit down and talk.

"We submitted our proposal to China Eastern after serious consideration," a senior CNAC executive told Reuters.

"CEA needs time to study it, and we will not come up with a more detailed proposal before it is willing to sit down with us at the negotiating table," said the executive, on conditions of anonymity.

The remark came after CEA, the mainland's third largest carrier, signed a framework agreement with China Southern Airlines, the second largest airline, on Tuesday.

The deal included sharing facilities and joint operation of air routes.

Analysts said that the Air China's stand signals a hardening stance between CNAC and CEA, and a tie-up between the two could now become difficult.

Eugene Law, research director at CASH Securities Ltd, said CEA was "naughty and miss the chance to become a regional leader by forming a partnership with Air China".

That, according to Law, partly led to its share slide to HK$5.58, a 6.22 percent drop despite the largest single-day gain of the Hang Seng Index.

Describing the CEA's tie-up with China Southern as "hostile" against CNAC, Matthew Kwok, research head of Tanrich Financial, said: "CEA shows its strong opposition against CNAC's proposal."

Kwok advised investors not to buy the shares of CEA or China Southern.

"There are too many uncertainties in this 'triangular love affair', which cannot be cleared at anytime soon," he added.

CNAC last week proposed a strategic partnership between Air China and CEA, which would bring a $1.9 billion cash injection. However, CEA refused to respond to the proposal saying it was incomplete and lacked legal validity.

(HK Edition 01/24/2008 page2)