Malaysia’s AirAsia Bhd has dropped a plan to acquire Indonesian low-cost carrier Tigerair Mandala and will instead grow its business organically in South-East Asia’s biggest economy with planned investment of US$300 million a year.

“We would like to confirm that we evaluated to purchase Mandala. And after a long search have decided not to pursue this transaction,” AirAsia group chief executive Tony Fernandes said in an email to Reuters today.

The shelving of the planned acquisition follows a similar pullout from an Indonesian carrier. Citilink has ended talks to buy Mandala, two sources familiar with the discussions told Reuters yesterday.

Singapore-based Tiger Airways Holdings Ltd is looking to sell its 35.8 percent in Mandala to cut its overseas exposure and focus on returning its flagship Tigerair business to profitability.

Through Mandala, Tiger Airways has a small share of Indonesia’s fast-growing low-fare market, amid intense competition with other Indonesian budget carriers including Lion Air and Citilink, a unit of Garuda Indonesia.

“AirAsia Indonesia is doing well now and our third and fourth quarters are looking good. Indonesia remains our main growth story. Organic is the way,” Fernandes said.

- Reuters