CHINA Eastern Airlines may establish a low-cost carrier on the Chinese mainland if its new joint venture budget airline based in Hong Kong proves to be successful, a senior official of the Shanghai-based airline said yesterday.

Scheduled to start flights later this year, Jetstar Hong Kong, a venture with Australia's Qantas, will be used as a test bed for China Eastern to tap the mainland's market for budget airlines, General Manager Ma Xulun told Shanghai Daily.

Ma said China Eastern may also cooperate with Qantas on the new budget airline on the mainland and seeks to be the first major Chinese carrier to tap the mainland's low-cost airline market.

"China Eastern has always been trying to enter the low-cost airline market amid rapid growth of the budget carrier sector around the world," Ma said in Beijing. By the end of last year, budget airlines accounted for 30 percent of the aviation market in Europe, Ma said, adding that they also took a big market share in the United States and Asia while the global average stood at 23 percent.

But on the mainland, Shanghai-based Spring Airlines is the only budget carrier, and it had only about 5 percent of the market last year.

Despite the huge potential, Ma, however, warned there are many hurdles on the mainland that budget airlines have to face.

"The low-cost carrier actually has to bear high costs on fuel, salaries and various operational charges in China," Ma said.

China Eastern, the country's second-biggest airline by passenger numbers, and Qantas will invest up to US$198 million over three years for the equally-owned Jetstar Hong Kong, which was set up in March last year.