Ho will hold the stake through his helicopter firm, East Asia Airlines, and manage the carrier through his budget airline start-up, Hong Kong Express, said the source.

Lam Kuo, founder of Golden Dragon, will retain a 20 percent stake.

``Ho and Lam have been good friends for a long time and both are upbeat about the outlook for Macau,'' said Lam's personal assistant, Helen Ko. She declined to comment on Ho's investment in the company.

Macau has seen tourism boom since liberalizing the gambling industry in 2002. The city's economy grew 8.5 percent in the first quarter, thanks to a 19 percent increase in visitor arrivals.

Air Macau, the only airline based in the city so far, is in talks with Shun Tak Holdings, a Hong Kong-based developer also controlled by Ho's family, to set up a budget airline, despite Australia's Virgin Blue quitting talks.

Another start-up, Wow Macau, which is in negotiations with Air Macau for a sub-concession license, will probably reach a deal over the next three to four weeks, said chief executive Andrew Pyne.

Golden Dragon, founded in May 1993 and with small operations in the mainland, has been granted rights to fly from Macau to eight cities across the border, including Guangzhou and Nanning, as well as Hanoi in Vietnam and Vietiane in Laos, sources said earlier.

Ho and Lam are still in talks on the airline's valuation, so there is no price tag on the Golden Dragon stake, said the source.

The airline's investment in the first two years will be 160 million patacas, said Ko, adding that Golden Dragon will launch the first service from Macau to the mainland by the end of next year. It will have 200 staff initially.

Meanwhile, Stephen Miller, managing director of Hong Kong-based budget carrier Oasis Hong Kong Airlines, said the company obtained the required endorsement document from the Air Transport Licensing Authority last Friday.

alman.loong@singtaonewscorp.com

Zach Coleman contributed to this story