Grand China Airlines may take its Hainan Airlines unit private before floating its own shares in Hong Kong next year, Caijing Magazine said on Monday.

Grand China Air, which replaced billionaire George Soros as the biggest shareholder in Hainan via a private share placement in June, is considering buying out the publicly traded shares of the unit, the semi-official magazine said, citing unidentified sources.

The firm now controls 53.67 percent of Hainan, the country's fourth-largest airline by fleet size. After a buyout, Grand China would seek a listing in Hong Kong, hopefully in the second half of 2007, the magazine said.

Hainan, which operates 95 planes, is mainly a domestic carrier but also flies to foreign destinations including Bangkok, Kuala Lumpur, Osaka and Budapest.

It raised USD$700 million in a share sale last month as it plans a major fleet expansion to compete with China's "Big Three" airlines -- Air China, China Eastern Airlines and China Southern Airlines.

Hainan's chairman Chen Feng said last year the carrier wanted to double its fleet to 200 aircraft by 2010 and would expand partly by merging with three smaller rivals.