Finnish flag carrier Finnair plans to use its stock options to increase its stake in Norwegian Air Shuttle by the end of 2008, Finnair's Chief Executive said late on Wednesday.

The two firms agreed in April last year for Norwegian to buy Finnair's Swedish subsidiary FlyNordic, paying with shares and stock options giving Finnair initially 5 percent of Norwegian, with the option to increase its stake to 10 percent by exercising all options.

"We have an option to increase our share to over 10 percent by the end of this year and I believe we will also do so," Finnair Chief Executive Jukka Hienonen told public broadcaster YLE television in an interview.

"The price we have back then agreed for this deal is currently very attractive to us. The company's share price is significantly higher than at the time of the deal," he said.

The firms had agreed that the stock options can be exercised at an average strike price of NOK115 Norwegian kroner (USD$21.61). Shares in Norwegian traded at NOK132 on Wednesday.

To the question of whether Finnair would buy a bigger stake, Hienonen said it was difficult to say.

"We intend to tighten our partnership in that (Norwegian's) direction. We need a partner in Scandinavia who can feed (passengers) into our routes... Norwegian is an excellent partner for us in this sense."

Hienonen said Finnair was not planning to discontinue domestic routes in Finland and that its domestic operations were profitable.

"The problem is that domestic traffic doesn't grow and traffic is mostly one-way where an empty plane goes to one direction and a full one to the other," he said.