Kenya Airways plans to launch a low-cost subsidiary to handle regional flights, a local newspaper reported on Wednesday.

The flag carrier of the east African nation, one of the largest on the continent, is 26 percent owned by Air France-KLM .

Business Daily reported the new airline, called Jambo Jet, will take on several smaller airlines that have become popular with passengers on domestic routes and to neighbouring countries.

A Kenya Airways spokesman told Reuters the airline had registered Jambo Jet, adding it was too early to share further detail about the plan.

A growing middle class in Kenya and higher tourist arrivals have increased demand for air services as more and more people fly to holiday destinations at the coast or Kisumu in the west of the country.

Travel to neighbouring capitals like Juba and Kampala has also increased on the back of rising regional trade and integration.

Kenya Airways said in June it expected a strong year and was planning to raise additional capital later this year to fund expansion.