Southeast Asia's largest low-cost carrier AirAsia on Thursday said a plan to launch a new budget airline in Vietnam was "on track" despite reports the venture had been refused a licence.

"As far as AirAsia is concerned, we are on track with the business proposal," the airline said in a statement.

Reports had said that the venture, Vina AirAsia, has been refused a licence by the Vietnamese government.

AirAsia's chief executive Tony Fernandes in August said Vina AirAsia planned to begin flying in July 2008, with possible routes to southern China from its hub in Hanoi.

The airline signed a Letter of Intent for the proposed budget carrier with Vietnam Shipbuilding Industry Group, an event witnessed by Vietnamese Prime Minister Nguyen Tan Dung.

AirAsia said "both parties are making necessary arrangements to finalise the business proposal."

"As of today, we have not received any directive or official statement from any Vietnamese authorities," it added.

AirAsia's has similar partnership agreements with Thailand and Indonesia.