Cathay Pacific Airways and Hong Kong Dragon Airlines should restructure their common shareholdings to make them more competitive in the rapidly liberalising Asian aviation market, a senior executive of Citic Pacific says. Managing director Henry Fan Hung-ling said that with the mainland virtually throwing its doors open to direct services from foreign carriers, the Hong Kong government had little choice but to follow suit in a move that would heap competitive pressure on Cathay and Dragonair. 'Under those circumstances, it will make a lot of sense for Cathay and Dragonair to co-operate rather than continue to duplicate each other's routes,' said Mr Fan, whose company owns 25.51 per cent of Cathay and 28.5 per cent of Dragonair. 'We will support any restructuring that will see that co-operation strengthened.' Mr Fan's comments on the sidelines of Cathay's annual general meeting yesterday were seen as a sign that the merger of the carriers - first reported in the South China Morning Post on March 16 - may be drawing near and is supported at the highest levels of both the airlines and their parent firms. While Cathay's passenger and cargo volumes continue to grow in line with its rapid fleet expansion, it is struggling for meaningful access to the promising mainland market - a malaise that a Dragonair merger will remedy - and with the escalating cost of aviation fuel. Fuel now accounted for 'more than 30 per cent' of Cathay's operating costs, up from 24 per cent last year, chief executive Philip Chen Nan-lok said yesterday. There was, however, some relief yesterday in the price of jet kerosene traded in Singapore - the region's benchmark index - where the cost for a barrel fell to US$64.15, down 15.97 per cent from its April 4 peak of US$76.35. 'It's beginning to hurt,' chairman David Turnbull said. 'Our fuel bill will be a lot bigger than last year.' Cathay spent just over US$1 billion on fuel last year, up 49.7 per cent on 2003. Cathay had hedged, or pre-bought at a set price, about 12 per cent of its expected fuel needs this year, Mr Turnbull said. The airline has applied to the Civil Aviation Department for an extension of its fuel surcharge past the May 31 expiry date and it is thought to have also applied for an increase in the $42 and $118 per one-way ticket it levies on short and long-haul flights. Cathay does not reveal what proportion of its added fuel costs is recovered by the surcharge. But the International Air Transport Association, the aviation sector's de facto governing body, last month said the industry recovered 10 per cent to 20 per cent of the added fuel burden last year.