Budget carrier AirAsia flew into Indonesia's domestic market on Wednesday with the launch of a new service bringing the Malaysian airline nearer its goal of becoming an Asean-wide fleet of more than 100 jets.

Unveiling its US$10 million joint venture with Awair, an Indonesian firm dormant since it was grounded by intense competition in 2001, AirAsia saw off its first flight from Jakarta to the city of Medan on the island of Sumatra.

The launch marks the three-year anniversary of the Malaysian no-frills carrier which has expanded from a three-jet operation to become Asia's leading economy airline with a fleet of 26 planes and a 7.5 million passenger manifest.

AirAsia chief executive Tony Fernandes said although the Indonesian venture would stand at just two Boeing 737 jets by the end of 2004, he had nearly sealed a deal for 80 more aircraft, many of which would ply Indonesian routes.

"We are looking to buy 80 new planes. We are very, very close and we believe we are still on track to make an announcement later this month," Fernandes told reporters in Jakarta. He said both Airbus and Boeing were still in the running.

Fernandes said he expected Awair, in which AirAsia has a 49 percent stake, to expand along similar lines to the company's Thai AirAsia operation, which he said now has 1.5 million passengers annually.

"Together we believe we will have many, many more Indonesians flying and bring more tourists to Indonesia," he said.

Expanding further

He said the expansion into Indonesia also put the airline on track to become a regionwide player with a goal of covering most, if not all, of the Association of Southeast Asian Nations (Asean).

"We hope to make it into an Asean brand enabling our business to grow as we have more flights. We must see Asean as one destination, then we will be in a very strong position to compete with China, India and the rest of the world."

Fernandes said the group was still exploring the possibility of expanding further with flights to India and, with the establishment of its Indonesian operation, moving south into Australian airspace.

"India remains a possibility. Australia would be very much the domain of Awair, but we do not believe that a low cost airline can be profitable outside the three-hour radius."

Fernandes, a former record label executive who plays down comparisons with British music and airline entrepreneur Richard Branson, said the carrier's low start-up cost was due to AirAsia infrastructure already in place.

Awair president Pin Harris stressed that the airline's budget operation would not encroach on its commitment to air safety, with jets serviced to meet international aviation standards.

Concerns over flight safety in Indonesia's internal air network have been high following the crash last week of an MD-82 jet that killed 26 people and injured more than 100.

Balikpapan route

Low cost carrier Lion Air said its aircraft skidded of the runway in the Central Java town of Solo due to bad weather and strong tailwinds.

In addition to its Jakarta to Medan service, Awair will in the next few weeks open a route to Balikpapan in Kalimantan with ticket prices starting at less than US$10. A service to Bali was expected to begin in 2005.

Fernandes said despite the success of his airline, whose shares have performed well since they were publicly listed last month, he has only limited plans for the future.

"I'm not a long term planner, we grow as quickly as we can but we're sensible about our growth and I don't have any specific target."