SWIRE Pacific wants closer ties with China's airlines and will even consider an equity swap deal between them and its subsidiary Cathay Pacific Airways - representing a departure from previous policy. ''Cathay does not see much merit, if any, in entering into equity swaps with other carriers,'' said Swire chairman Peter Sutch. ''But bearing in mind what is happening in Hong Kong, and the way in which Cathay is becoming part of the Chinese aviation industry, it would be unwise of us not to look at doing that type of deal.'' He implied that Cathay would prefer to forge increasingly closer commercial links with airlines such as China Southern and China Eastern, saying: ''We would like to be closer; it doesn't have to be through shares.'' Mr Sutch said that if it appeared a US or European carrier was about to merge with a Chinese airline, Cathay would view it as a ''potential threat''. He said: ''We would prefer it if relations with European or US airlines were not unduly strong. We would hope that the closest commercial ties will be with ourselves.'' Swire already has substantial Chinese investment in its aviation interests - CITIC Pacific holds a 12.5 per cent stake in Cathay, while China National Aviation Corp (CNAC) owns five per cent, as does China Travel Service (Holdings). Hong Kong Dragon Airlines, which flies to 14 cities in China, is 46 per cent owned by CITIC Pacific. Hong Kong Air Cargo Terminals, in which Swire has a 20 per cent stake, is owned 10 per cent by CNAC and 10 per cent by CITIC Pacific, while Jardines, Wharf (Holdings) and Hutchison Whampoa also own large chunks. Robert Sassoon, analyst at MeesPierson, said he expected Swire to continue forging closer ties with China. ''Swire's attitude has to be seen in the context of a strategy of building bridges with China,'' he said. ''Swire knows [which side] its bread is buttered. Dragonair performs well largely because of its preferential routes.'' He said Swire had been less aggressive in promoting its China ties than other Hong Kong conglomerates, such as Hutchison, Wheelock and Wharf, and as a result its share price had lagged slightly. ''If you look from October 1992, when [Governor Chris] Patten announced his democracy proposals, the best performers have been Wharf, Wheelock and Hutchison,'' Mr Sassoon said. ''Swire has done okay and headed the same way, while Jardines has only headed south. Cathay's prospects have dragged Swire shares down. Now people will increasingly focus on Swire's China strategy.'' In a related development, Shun Tak Holdings looks set to pocket an extraordinary profit from its sale of Air Hong Kong to Cathay. Shun Tak director Andrew Tse confirmed that Cathay had agreed to pay $200 million for a 75 per cent stake in Air Hong Kong. However, he said Shun Tak would actually receive less than that after payments for the shares bought back from minority shareholders and repayment of debt. A letter of intent was signed between the two parties in March, and the formal agreement is expected to be shortly. Air Hong Kong is 80 per cent owned by Shun Tak, with 20 per cent held by a private company run by casino mogul and Shun Tak chairman Stanley Ho. Following the proposed sale, Shun Tak will be left with a 20 per cent interest in the air cargo carrier - Mr Ho intends to keep the balance of five per cent. Mr Tse said Shun Tak would realise ''tens of millions'' of dollars in profit from the disposal, as it had suffered painful write-offs for its investment and advances to the airline when it was struggling in 1992. He predicted Air Hong Kong would incur no further losses this year, after bouncing back into the black last year. Asked about progress on the redevelopment of Belcher Gardens, Shun Tak director Anthony Chan said the company had commissioned a design plan for the project. The Mid-Levels site covers 29,998 sq metres and has a plot ratio of 6.5 times. Because of a lack of commercial space in the district, Mr Chan said the company would set aside more than 600,000 sq ft for a commercial complex.