China's Shenzhen Airlines and the Mesa Air Group of the United States have teamed up to launch a regional airline in China.

The two sides signed an agreement in Beijing on Friday on the establishment of a joint regional airline, with a registered capital of 500 million yuan (64 million U.S. dollars).

Shenzhen Airlines will hold 51 percent of the new airline, the first Sino-foreign joint airline in China, and the remaining 49 percent goes to the U.S. company.

The joint venture is scheduled to begin operation in 2007 with 20 aircraft and the fleet is expected to expand by 20 aircraft annually before eventually reaching 200.

Sources with Shenzhen Airlines said the new airline was yet to be named.

Yang Guoqing, deputy head of the General Administration of Civil Aviation of China (CAAC), said the airline would play a positive role in developing China's regional air services.

Jonathan Ornstein, president of Mesa, said his company had been seeking development opportunities overseas and China had provided a good policy environment for foreign businesses in its civil aviation market.

Mesa Air Group was established in 1982 and boasts a fleet of 188. It operates regional flights to 173 cities in the United States, Canada and Mexico.

Shenzhen Airlines began in September in 1993. It has a fleet of more than 30 aircraft and employs more than 5,100 people. It operates more than 80 domestic and international air routes.

By the end of 2005, China had 73 regional aircraft in service, less than nine percent of China's total aircraft in service.

A regional aircraft has 50 to 110 seats and its flight distance ranges from 600 to 1,200 kilometers.