SHANGHAI - China Eastern Airlines has set up a joint task force with smaller rival Shanghai Airlines to proceed with a merger, paving the way for further consolidation of the country's fiercely-competitive aviation market, a senior executive said.

"The two airlines have started discussing and working on the restructuring," Liu Jiangbo, vice president of China Eastern's parent told Reuters on Thursday.

China Eastern's Chairman Liu Shaoyong is the head of the joint task force, she said.

The two carriers both suspended trading of their shares earlier this week because of major restructuring moves.

(Reporting by Fang Yan and Jacqueline Wong)