China Eastern Airlines and AVIC I unveiled terms of their regional airline joint venture, which will be called Happy Air and eventually will fly a fleet of 50 MA60s and 50 ARJ21s, although regulatory approval may be delayed.

CEA MD Cao Jianxiong said that the new venture has yet to secure CAAC approval although it submitted its plan to the regulator last August. "We are still in preparations, although there is no specific timetable on when we will get approval," Cao said.

Industry analysts have suggested that Happy may have to wait for the government's go-ahead, as CAAC Minister Li Jiaxiang reiterated last month that the regulator will not approve any new entrants before 2010 and will impose stricter conditions and procedures for new carriers in order to slow the rapid growth of Chinese commercial aviation.

AVIC I will be Happy's controlling shareholder with a 60% stake and an investment of 600 million yuan (US$83.4 million), while CEA will put in 400 million yuan to hold the remaining 40%. The carrier will be based in Xi'an, which industry insiders suggest is a sign that CEA hopes to recapture the West China market it has yielded to Hainan Airlines parent HNA Group since its 2005 decision to transfer its Xi'an-based fleet to Shanghai-Beijing service in an effort to bolster its market share in Shanghai.

China Securities Co. aviation analyst Li Lei noted there is little hope for the new venture to be profitable in the short term as Chinese regional carriers are posting collective losses and relying on government subsidies to survive.