UPDATE 1-China Airlines has no immediate plan to cut HK flights

(Releads with comment from Taiwan headquarters)

HONG KONG, May 19 (Reuters) - Taiwan carrier China Airlines (2610.TW) said on Monday it needs to wait until cross-strait relations improve before it decides whether to cut its Hong Kong-Taiwan passenger flights.

The comments came after a local newspaper said the airline would cut its Hong Kong-Taiwan passenger flights by about 20 percent once direct weekend charter flights between Taiwan and the mainland begin on July 4.

"At this time we don't have such a specific plan," a spokeswoman from the airline's Taipei head office told Reuters by telephone. "When cross-strait relations improve and market trends are clearer, then we'll make a specific plan."

Taiwan president-elect Ma Ying-jeou is due to take office on Tuesday and analysts expect his appointment to bring an improvement in relations between China and the island.

The South China Morning Post on Monday quoted Michael Wu, general manager of the airline's Hong Kong branch, as saying two to three daily flights from Hong Kong would be cut while some Airbus 330-300 aircraft would be redeployed to provide direct cross-strait services.

Taiwan president-elect Ma has pledged to relax cross-strait travel and has suggested that Taiwan airports should be opened to destinations in China, including Beijing, Shanghai, Guangzhou and Xiamen, with effect from July 4, the newspaper said.

"It's pretty obvious that people would prefer to travel directly from Taiwan to the mainland in 90 minutes instead of spending half a day transiting in Hong Kong," Wu said.

The Hong Kong office of China Airlines, which accounts for 10 percent of the airline's total sales, sees an increase in revenues of between 5 and 10 percent this year to about HK$4 billion ($512.9 million), Wu said.

He said revenue from the airline's cargo division in Hong Kong was up 30 percent in March and April, while passenger sales increased 5 percent.

"But the impact of the changes (to cross-strait policy) on us will be far less than that on Cathay Pacific and Dragonair," Wu said. He gave no further details.

Cathay Pacific (0293.HK) and Dragonair fly 18 daily flights to Taipei and 5 daily flights to Kaohsiung, the newspaper said.

Cathay Pacific chief executive Tony Tyler had said that the airline would cut unprofitable routes due to soaring fuel prices.

Five airlines currently operate a total of 3,000 flights between Hong Kong and Taiwan each month, providing about 1 million seats. China Airlines provides more than 270,000 seats a month with 80 percent of the seats sold on average, the newspaper added.

Shares of China Airlines rose 1.83 percent to T$16.65 on Monday, while Cathay Pacific's shares were down 1.57 percent at HK$16.28 on Monday. (US$1=HK$7.8) (Reporting by Donny Kwok, additional reporting by Steven Bian in Taipei; Editing by Anne Marie Roantree)