SHANGHAI Airlines Co, China's fifth-biggest carrier, said its first-quarter loss narrowed 32 percent after the company was allowed to increase fuel surcharges.

The airline posted a net loss of 95.8 million yuan (US$12 million), or 0.09 yuan a share, under domestic accounting standards in the first three months of the year, the Shanghai-based regional carrier said in a statement to the Shanghai Stock Exchange yesterday. The carrier racked up sales of 2.56 billion yuan in the three-month period, compared with two billion yuan a year ago, it said.

Shanghai Airlines, which is set to join Star Alliance later this year, competes with China Eastern Airlines, China's third-biggest airline which is also based in Shanghai. The regional carrier opened more new services this year, including the popular Shanghai-Hong Kong route, sharpening its competitive edges as it expands its network.

Shanghai Airlines' 2006 profit fell 82 percent to 8.19 million yuan from 46 million yuan because of higher fuel costs, it said in a separate statement yesterday. Sales rose 24 percent to 9.93 billion yuan from 7.98 billion yuan.