China Eastern Airlines has entered into an agreement with state-run aircraft maker China Aviation Industry Corporation I (AVIC I) to establish a carrier.

China Business News reported that the joint venture, to be named Xingfu (Happiness) Airlines, will have 1 billion yuan (HK$1.09 billion) in registered capital, with China Eastern holding a 40 percent stake and AVIC I, 60 percent.

China Eastern Airlines was created in 2002 through the combination of China Northwest Airlines, southern Yunnan Airlines and the then Shanghai-based China Eastern Group.

Xingfu Airlines is expected to be based in Xi'an, one of China's northwestern hubs, which will help strengthen China Eastern's position in the region. The deal is subject to approval by China's aviation regulator.

The move by China Eastern comes just days after it signed a cooperation agreement, which did not involve any equity changing hands, with China Southern Airlines. This came after Air China's parent China National Aviation Corp had submitted an investment proposal which would have involved a transfer of equity.