China’s central government is urging the country’s three largest airlines − Air China, China Eastern Airlines and China Southern − to merge their cargo operations so as to compete with foreign carriers that dominate the market, South China Morning Post reported.

A senior official at China Southern said a preparation team had been formed to work out the details of the consolidation.

However, any such venture would have serious implications for Air China’s cargo tie up with Cathay Pacific that was announced in February but still awaits final state approval.