Indonesia's PT Lion Mentari Airlines said Tuesday it will launch a new low-cost airline with Malaysian firm NADI that could challenge regional budget giant AirAsia.
The new Malindo Airways will start regional flights by May next year with a fleet of 12 Boeing 737s, said Indonesia's largest privately run airline, which operates as Lion Air, and Malaysia's National Aerospace and Defense Industries (NADI).
Lion Air president Rusdi Kirana said the companies were counting on an increase in travel, with the Asia Pacific region expected to have 2.2 billion passengers in 2030 and need 11,450 new airplanes to meet the demand.
NADI, which specialises in maintenance, repair and overhaul services, will own 51 percent of the joint venture. Lion Air will supply the fleet, based out of Kuala Lumpur, AirAsia's home market.
"We are giving affordable prices but with better services" than other budget airlines, such as in-flight entertainment, Kirana told reporters before the joint venture signing ceremony in Kuala Lumpur.
The airline plans to initially fly to Kota Kinabalu in Malaysia as well as destinations across Indonesia, Manila, Hanoi and cities in Australia and China.
Over the next decade it hopes to expand its fleet to 100 planes, including five flagship 787 Ddreamliners to arrive in 2015, when Malindo plans to fly to Europe.
OSK Research aviation analyst Ahmad Maghfur Usman said Lion Air working with a local partner to break into Malaysia's regulated airspace could pose a "real challenge" to AirAsia.
"Lion Air already has a strong infrastructure to begin with," he told AFP. "As long as they offer a competitive compelling fare, it will put a fight to AirAsia... The winners here will be the consumers."
AirAsia has become one of the aviation sector's biggest successes, since Tony Fernandes, a former record industry executive, plucked it from insolvency in 2001 and quickly turned it into a profitable, rapidly expanding company.
Last month, the budget carrier announced that it would buy Indonesia's Batavia Air for $80 million, as it spreads its wings in Southeast Asia's largest economy.
It also recently set up a regional headquarters in Jakarta to direct its expansion.
Lion Air flies to 72 destinations with 600 daily departures. It also flies to Singapore, Malaysia, Vietnam and Saudi Arabia while its long-haul arm Batik Air will begin operations in March next year with six Boeing 737s and five Boeing B787 Dreamliners.
This year Lion Air sealed a record $22.4 billion deal for 230 Boeing 737 jets. The first aircraft will be delivered in 2017, and the deliveries will run up until 2026.