A new terminal dedicated to low-cost airlines will be built at Kuala Lumpur International Airport (KLIA) in a move that will help, not hinder, pioneer budget carrier AirAsia, the government said today.

The terminal would cost RM100 million, Transport Minister Chan Kong Choy told a news conference.

"This is a strategic move to ensure Malaysia stays an attractive country for low-cost carriers. The building of a dedicated terminal will make sure an aircraft can make a turnaround time of 20 minutes," he said.

Southeast Asia's biggest low-cost carrier - the Malaysia-based AirAsia - had hoped that the former main airport, Subang, would become the hub for budget airlines, but Chan said the new terminal would help the airline.

"This will enhance the position of AirAsia as a leading budget carrier in Asia," he said. "The establishment of the terminal is timely as AirAsia's passenger volume this year is expected to go up to eight million from 3.4 million last year."

Chan also said low-cost operators in Singapore had indicated interest to fly into Malaysia but serious talks had not started.

Other plans for Subang

AirAsia began operations at Subang airport near Kuala Lumpur but moved to KLIA, some 50 km south of the capital, in July 2002 in line with the government's plan to make KLIA the main gateway for Malaysia.

Chan said if the terminal was constructed in Subang ( photo ), it would be more expensive, adding that "we have some other plans for Subang." He did not elaborate.

"It could cost some RM280 million to RM300 million to build in Subang," he said.

AirAsia had been in talks with the government to allow it to return to Subang and turn it into a dedicated hub for low-cost carriers as it would allow the carrier to keep expenses down.

Chief executive officer Tony Fernandes on Monday downplayed concerns that AirAsia would suffer if the government decided to keep the carrier at KLIA.

"Either way, it will be good news for AirAsia," Fernandes said.