China's airline industry grew slightly and was profitable on aggregate in the first quarter thanks to government bail-outs and tax breaks for struggling carriers, according to Li Jiaxiang, vice-transport minister and administrator of the Civil Aviation Authority of China.

He said there had also been a jump in domestic passenger and cargo demand in the first quarter that had helped support the struggling industry as it is being buffeted by falling profits and huge losses on bad derivatives bets. The fact the industry was able to make an aggregate profit in the first quarter marks a dramatic turnround after a miserable year of losses in 2008.

“Of course, CAAC's measures to reduce taxes and return some cash to airlines has had an effect,” Mr Li said in Beijing yesterday. “But most important is that China's domestic passenger transport volumes remain on a positive growth trend.”