Hainan Airlines, China's largest non-state-owned airline, is buying into budget carrier Zest Air owned by Alfredo Yao.

Yao, chairman of the Zesto Group, has signed a memorandum of understanding with officials of the Hainan Airlines on the sidelines of the state of visit President Aquino to China recently.

Trade Undersecretary Cristino Panlilio said the partnership would allow the airline to fly direct to Hainan province.

Panlilio said the carrier would be able to add more flights and serve more passengers.

"In every destination (to China), there is enough volume," Panlilio said.

He added Yao would retain controlling interest in the joint venture.

Yao said did not disclose how much equity Hainan Airlines is taking but said under the law; foreigners are allowed up to 40 percent ownership in a local airline.

"They are still doing due diligence and that will take time," Yao said.

According to Yao, Hainan Airlines' entry into the company is part of Zest Air's strategy to expand its reach overseas, particularly China.

To support the expansion, Yao said Zest Air will acquire nine aircraft in 2012.

Panlilio explained the MOU between Hainan Airlines and Zest Air was not part of the mass signing of agreements witnessed by President Aquino during his trip in China.

By the end of the year, Zest Air will have a fleet of 10 aircraft - six Airbus planes and four Modern Ark 60s. The company would have 19 by next year.

Zest Air plans to increase more flights for the routes Kalibo-China, Cebu-China and Manila-Singapore. It also plans to mount flights to Taipei, Palau, Singapore, Bahrain and Dammam.

Zest Air flies to Incheon and Pusan in South Korea from Kalibo and Cebu.

The airline flies to Boracay via Kalibo, Bacolod, Busuanga, Calbayog, Catarman, Cebu, Davao, Iloilo, Legazpi, Marinduque, Masbate, Puerto Princesa, San Fernando, San Jose, Tablas, Tacloban, Tagbilaran and Virac.

Hainan Airlines is the flagship of HNA Group, a diversified group with air transportation as its core business. HNA businesses covers other industries such as tourism and service, airport management, logistics, hotel management, retailing, finance and other related businesses.