Malaysia's no-frills AirAsia said it will not scale back expansion plans due to an outbreak of a mysterious atypical pneumonia, saying Sars was unlikely to threaten its revenue or hamper growth.

"We are doing well. We posted 400 percent growth in passenger volume for April compared to the corresponding period last year," Air Asia's chief executive Tony Fernandes told AFP.

Fernandes said while airlines were struggling globally and pursuing cost cuts, AirAsia would continue with its route and fleet expansion.

"We are undeterred. We are confident of achieving what we set off to achieve," he said.

The airline, which began domestic flights in December 2001, now boasts a fleet of seven leased Boeing 737-300s and has been described as a "vibrant and profitable low cost airline."

Critics initially forecast that the carrier would cease its operations within three months, helping bankers to turn their backs o­n the company.

Revenue up

AirAsia in 2002 recorded an improvement of its financial results, which it attributed to high passenger traffic, rise in revenues and effective cost management.

Its operating revenue rose 33 percent to RM222 million (US$58 million , compared to RM167.8 million in 2001. It has since become a debt-free airline.

Five individuals control the ownership of the company of 500 employees, with Fernandes controlling 25 percent.

A senior economist with a foreign Asian bank predicted the Severe Acute Respiratory Syndrome may not be a threat to AirAsia's bottom line.

"With the economy slowing down, more people will want to fly AirAsia to enjoy its cheap tickets," he told AFP o­n condition of anonymity.

The economist said that since AirAsia flies o­nly domestic routes, it was immune from external shocks.

The carrier's investors were managing it prudently and transparently, he said, noting: "Their operation cost is low. Their resources are fully utilised. Its aircraft are in the air most of the time.

"I don't think Sars will bite into their earnings."

Paying dividends

Fernandes said AirAsia had embarked o­n an aggressive advertising campaign including radio and print ads to counter any negative fallout of Sars.

"It is paying dividends. We are seeing a lot of repeat fliers. Some 150,000 passengers flew with us in April," he said with a smile.

Fernandes said after two years of operation, the public had come to accept that AirAsia provided efficient service, despite the lower cost of air travel when compared to national carrier Malaysia Airlines.

"This month, 98 percent of our flights were o­n schedule. We are running at 65 percent load factor," he said.

Fernandes said AirAsia would lease 11 new Boeing 737-300 aircraft to serve its needs as it was expected to fly to new destinations, including to the southern Johor state and Sarawak's oil rich town of Bintulu o­n Borneo island.

Aircraft deliveries would begin in June and continue until April 2004, he said. - AFP