AIR China will not step into the budget carrier market any time soon, a top official with the nation's biggest international airline said yesterday.

Wang Changshun, chairman of the airline, made the remarks on the sidelines of a meeting in Beijing and they come about three months after rival China Eastern Airlines and Australia's Qantas banded together to set up a regional low-cost carrier called Jetstar Hong Kong.

"China's civil aviation industry is facing a more severe situation than that during the financial crisis in 2008 ... So, Air China will mainly focus on improving its current main services," Wang said.

He said the country's airlines had been impacted by the debt crisis in Europe, the slowing economic growth in the US as well as the sluggish Asian economy.

Referring to Chinese airlines, Wang said: "Passenger transport service is better than cargo, the domestic market is better than the international one and regional routes are better than the arterial ones."

Air China made a net profit of 7.5 billion yuan (US$1.17 billion) last year, down 38.8 percent from 2010 mainly due to rising fuel prices.

However, the Chinese market is expected to expand this year.

Wang estimated domestic passenger volume will increase to about 350 million this year from last year's 290 million, while the fleet number will gain by about 200 by the end of the year.

China Eastern, the country's second-largest airline by passenger numbers, and Qantas, Australia's top carrier, announced in March that they would invest up to US$198 million over three years for the equally-owned Hong Kong-based joint venture.

Jetstar Hong Kong will start operation in mid-2013 with three Airbus 320 aircraft before expanding to 18 planes by 2015, when the venture is expected to become profitable, according to China Eastern.

"I believe this low-cost model, whether in a high or low oil-price environment, will be competitive," said Liu Shaoyong, China Eastern's chairman.