Russia may launch a joint venture with China to continue the development of a new passenger airliner, MS-21, the head of a Russian state-run aviation corporation said on Monday.

"We will come to a decision with Chinese manufacturers next year on the possibility of setting up a joint venture to design a new mid-range passenger aircraft, MS-21," Alexei Fyodorov, the CEO of the United Aircraft Building Corporation, said at the Farnborough-2008 air show in Britain.

The MS-21 plane is being developed by Russia's major manufacturing companies - Ilyushin, Tupolev and Yakovlev - to replace the aging Tu-154, which currently services some 80% of Russia's passenger and freight traffic, and also the Airbus A-320 and Boeing 737 aircraft.

The new passenger jet, due to enter service in 2012, is expected to be 10-15% more efficient than its class's Boeing and Airbus. However, its target price will be just $35 million, $20 million below that of the similarly-sized Boeing 737-700.

Fyodorov said the financing of the project, expected to total about $6.5 billion, would be evenly split between the state and private investors.

He said that China was already developing a program to build a similar type of aircraft and that a meeting with a Chinese working group was expected in the near future to discuss prospects for cooperation.

Fyodorov also said Russia would soon announce international tenders for the production of MS-21 components.

"We will announce global tenders with the participation of leading foreign and domestic companies to manufacture components for the MS-21, the most ambitious Russian project in the sphere of civil aviation," Fyodorov said.

The single-aisle MS-21 family of passenger aircraft is designed to seat between 150 and 220 passengers and to fly up to 5,000 kilometers (3,125 miles), or 6,350 kilometers (4,000 miles) in the case of the longer-range model.

Together with the Sukhoi Superjet 100 passenger plane, the MS-21 may potentially satisfy 80% of Russian air carriers' demand for new aircraft.