Malaysian no-frills airline AirAsia warned today of an industry shake-out as more carriers enter the market but said it is ahead of the pack and will expand its fleet and maintain low fares despite rising fuel costs.

Chief executive Tony Fernandes also said AirAsia's initial public offering (IPO) slated for September is on track but talks with Singapore's state investment arm, Temasek Holdings, on taking a stake in the airline are expected to be put on hold until after the listing.

AirAsia, which pioneered no-frills travell in the region, started in 2001 serving the Malaysian market but has rapidly expanded in recent months to Indonesia, Thailand, Brunei and Singapore.

Its success has sparked a slew of other low-cost airlines, with privately-owned Valuair the first of three in Singapore to launch operations early this month.

The two others are Singapore Airlines' 49 percent-owned Tiger Airlines and another carrier involving Australia's Qantas Airways, while a new carrier is expected to take off in Thailand.

Head start

"The low-fare market is going to be very, very crowded and very few are going to survive," with budget carriers not only fighting among themselves but also with other major airlines which had started to slash prices.

"Many others are trying to emulate us but we have a two-and-a-half years advantage, so we'll take it as it comes."

Fernandes said AirAsia planned to expand its fleet from 17 aircraft currently to 24 by October and 36 by June next year.

He said the carrier has no plans to impose any passenger fuel levy because it has hedged nearly all its fuel requirements for the next three years.

"We've been through Sars (Severe Acute Respiratory Syndrome), we've been through two oil price shocks and this is the third one, so we are keeping to our promise of low fares and we are not going to insert a fuel charge," he told reporters after launching a program to woo corporate travellers. - AFP