Guangxi Beibu Gulf Airlines Co Ltd's first flight, from the city of Nanning to Haikou in Hainan, took off on Friday.
As the first carrier based in the Guangxi Zhuang autonomous region, which is a gateway to the Association of Southeast Asian Nations, BGA will enhance connections between China and the bloc.
Initially, BGA will operate five E-190 aircraft, built by Embraer SA of Brazil, to domestic cities such as Xi'an, Tianjin and Dalian. It aims to double its fleet by the end of this year.
Tianjin Airlines Co Ltd, the largest regional airline in China and a subsidiary of HNA Group, invested 2.1 billion yuan ($335.7 million) to take a 70 percent stake in BGA. Guangxi Beibu Gulf Investment Co Ltd, a local State-owned investment company, invested 900 million yuan for the remaining 30 percent.
The carrier will enlarge its fleet to 30 to 40 aircraft in the next three to five years, including 20 E-190 planes and 10 to 20 Airbus A320s, said Wu Chongyang, chairman and chief executive officer.
The carrier will have a network covering the main domestic cities and some ASEAN destinations by 2020, Wu said.
"The city of Nanning is a hub connecting China and ASEAN, which gives us the opportunity and challenge to develop air traffic here," Wu said.
Later this year, BGA will start at least two routes linking Nanning to ASEAN. Over the longer term, it plans to serve all 10 ASEAN members, he said.
The establishment of the carrier completes the province's traffic network.
"Beibu Gulf Airlines, based in Nanning, capital of the autonomous region, has a geographic advantage in connecting China and ASEAN and it will fly to ASEAN countries as soon as possible," said Lin Guan, chairman of Guangxi Beibu Gulf Investment. As a local government-owned entity, Beibu Gulf Investment will continue to invest in the carrier to support its growth, Lin said.
With cargo and passenger traffic between China and ASEAN members increasing, the carrier will have more business opportunities, analysts said.
China has been the largest trade partner of ASEAN for the past five years, while ASEAN is the third-biggest trade partner for China.
From 2001 to 2014, bilateral merchandise trade grew from $40 billion to $480.4 billion, according to the China-ASEAN Business Council.
Negotiations on upgrading the China-ASEAN Free Trade Area are expected to conclude by the end of 2015, which will bring a larger volume and variety of trade opportunities for both sides.
It is forecast that passenger volume in the autonomous region will rise by an average of 15 to 20 percent annually in the next five years.