MAINLAND aviation officials yesterday denied a Taiwanese report of a ground-breaking deal between two mainland carriers and Great China Airlines of Taiwan. According to a report by the Taiwanese newspaper, The United Daily, Xiamen Airlines and China Southern recently signed a letter of intent with Great China Airline to form a joint venture airline. The report did not specify how much the new airline would cost or how it would be formed. Aviation sources in Hongkong said last night that if the report was true it would have a significant impact on the territory. The source said Hongkong stands to lose an estimated two million passengers a year passing through Kai Tak once direct flights between Taiwan and China begin. Last year China announced a major restructuring of its aviation industry and opened all airlines and airports to foreign investors. Xiamen Airlines, which is 60 per cent owned by China Southern, has invested millions of dollars expanding its fleet of Boeing 737s for the day when direct flights begin. The airlines general manager, Mr Wu Rongnan, however, denied that his airline was part of any joint venture project with Great China Airlines. Speaking from Xiamen yesterday, Mr Wu said: ''We don't have such plans for China Southern, Xiamen Airlines and Great China. There's no such thing. ''We've never talked about this with Taiwan because it can't be done. We haven't signed any documents because it's against the laws of Taiwan.'' However, Mr Wu said he had met with Mr Shi Cong-qing, head of Great China Airlines, on several occasions, although he could not recall the last time they met. Xiamen Airlines currently flies to 27 cities in Southern China including Hongkong while China Southern operates to over 100 routes. Great China Airlines, one of a number of Taiwanese domestic carriers, has been undergoing a rapid expansion programme to meet the expected demand for direct flights to China. The airline has on order 12 McDonnell Douglas MD-80s and MD-90s worth US$200 million and mainly flies domestic routes and charters to the Philippines. ''Strategically, if a deal has been sown up - and that is a big if - the new airline will have all the routes in Southern China sown up,'' said an aviation source last night. Meanwhile, Evergreen International is reported to have taken a major stake in a new US$315 million airport at Fuzhou in Fujian province, according to reports in Taiwan.