China is in the midst of an airport building boom

Yinglian Airlines will be based in Chengdu, the capital of the south-western province of Sichuan.

Demand for air travel in China is expanding fast as the middle classes take more business and leisure trips.

E & Net Communications, which wants to move into aviation, said it had applied for permits to launch Yinglian.

"The new carrier is in the process of being established," said a spokeswoman for the firm, which is based in the southern industrial powerhouse of Guangzhou.

Budget airline plans

The head of China's airline regulator said last month that it was considering granting new licences to establish a budget airlines sector.

The Civil Aviation Administration of China (CAAC) director has received three applications but has not yet approved any, its director Yang Yuanyuan said.

New entrants to China's air travel market must meet CAAC safety standards, he stressed.

China's state run carriers are being restructured

Despite the CAAC's willingness to consider budget airlines, analysts said the regulator would also need to loosen controls on ticket prices for a low-cost carrier to succeed.

Another problem facing the regulator is that China is already awash with financially shaky airlines.

The cabinet-level State Council has ordered the restructuring of the country's state-owned regional airlines into three major groups capable of surviving in a market economy.

The process is due to be completed with a stock market listing for national flagship Air China later this year.

E & Net said its new carrier - with start-up capital of $12m - may join forces with one of the three airlines already operating in Western China, state media reported.

Fuelling the boom

Demand for air travel is growing. China's biggest jet fuel supplier said on Thursday it would be forced to step up imports in 2004.

"The domestic refineries can not meet the fast growing demand for jet fuel in China," said Chen Jiulin, chief executive of China Aviation Oil.