Crown Prince Mohammed bin Salman answers questions during a press conference in Riyadh. AFP
Riyadh Air "aims to launch flights to more than 100 destinations around the world by 2030," the official Saudi Press Agency (SPA) reported.
Tony Douglas, former head of Abu Dhabi-based Etihad Airways, has been appointed CEO, SPA said.
The Gulf kingdom is pursuing ambitious aviation goals as part of Crown Prince Mohammed bin Salman's wide-ranging "Vision 2030" reform agenda, including more than tripling annual traffic to 330 million passengers by the end of the decade.
It also wants to move up to five million tonnes of cargo each year.
Last November officials announced plans for a new airport in the capital Riyadh spanning 57 square kilometres (22 square miles), that is set to accommodate 120 million travellers by 2030 and 185 million travellers by 2050.
Sunday's announcement said Riyadh Air would operate a "fleet of advanced aircraft", but did not specify how big the fleet would be or from where it would be sourced.
The Wall Street Journal reported on Saturday that the Public Investment Fund, the sovereign wealth fund that will own the airline, was "close to a deal" with Boeing for an aircraft order "valued at $35 billion".
The kingdom's busiest international airport is currently in the Red Sea coastal city of Jeddah, where flag carrier Saudia is based.
Known as the "Gateway to Mecca", the city welcomes millions of Muslims performing the hajj and umrah pilgrimages each year.
Officials have in recent years tried to position Riyadh, in central Saudi Arabia, as a rival to business hub Dubai.
The capital currently has around eight million people, but officials have said they want the population to grow to 15-20 million by 2030.