China Eastern Airlines Co Ltd will establish a budget airline in Hong Kong with Qantas Airways Ltd, the flag carrier of Australia, the companies announced on Monday.

The joint venture, named Jetstar Hong Kong, is the first budget airline to register in Hong Kong.

The new carrier will have registered capital of $115 million, contributed equally by China Eastern and Jetstar Group, the budget airline subsidiary of Qantas.

Jetstar Hong Kong will start operations in mid-2013 with three Airbus A320 aircraft and expand to 18 aircraft by 2015, said Ma Xulun, vice-chairman of China Eastern, the nation's third-largest airline by market value.

A cooperation memorandum on the joint venture was signed on March 23, and it is awaiting approval by the Hong Kong Special Administrative Region's government, Ma said.

The airline will offer short-distance flights linking China, Japan, South Korea and countries in Southeast Asia. The first route hasn't been announced yet.

A budget carrier could be a good choice for China Eastern. The airline's profit dropped in 2011 because of fewer high-end customers.

On Sunday, China Eastern said annual net profit fell 9.2 percent to 4.89 billion yuan ($776 million) under China's accounting standards.

(For full story, please see China Daily page 15.)

The reporter can be reached at wangwen@chinadaily.com.cn