China's central government and the Shanghai city government are discussing the possibility of merging Shanghai Airlines with China Eastern Airlines, business magazine Caijing reported on Wednesday.

The magazine quoted an unnamed, senior source in Shanghai's aviation industry.

"At present the discussion is between government agencies, and the two companies have not taken part," the source was quoted as saying.

Asked to comment on market speculation about a merger, senior officials at both airlines said they had not heard of such a plan.