Dalian Airlines was established on Monday to tap the regional market, an official with Air China said Monday.

Kong Dong, chairman of Air China, said at the inauguration ceremony that Air China invested 800 million yuan (US$124.3 million) for an 80-percent stake in the new company and the rest is held by a Dalian government-affiliated company.

The air company is expected to start flights this year between Dalian, a port city in northeastern Liaoning Province, and major cities such as Beijing and Shanghai, he said.

In the initial stage, the new airline will operate three Boeing 737-800 jets and plans to increase the fleet size to five in the first half of 2012, he said.