"Beijing is a traditional city servicing international flights, while Shanghai is an important hub for flights in China, Japan and Southeast Asian countries. All carriers know the two cities' significance," Ji added.

Si Xianmin, president of the Guangzhou-based China Southern Airlines, said the new China Eastern would definitely shake China Southern's footing in Shanghai, but may be less influential in other areas.

"Shanghai positions itself as a would-be global financial center and shipping hub, and that would bring about more passenger flight demand. It's wise to secure and expand the market share in Shanghai before it is too late," said an insider from China Southern, who refused to be named.

"China Southern will start focusing more on Shanghai market," he said.

The insider said the current competition involves not only the top three State-owned carriers, but foreign carriers as well. In addition, budget carrier Spring Airlines has cultivated a large group of loyal clients through low-cost flights.

"If we factor in the rivalry of high-speed railways, the competition is even more complicated," he added.