Budget carrier AirAsia expects to grow its cargo business by more than 50 percent under a deal signed on Tuesday with a German firm.

The deal with Leisure Cargo GmbH will generate an additional RM12-15 million in annual cargo revenue, on top of the RM20 million earned last year, AirAsia's regional director of cargo, Abdul Nasser Kassim, said.

The outsourcing arrangement allows AirAsia to concentrate on its core business, Abdul said.

"We have the extra belly space. We can do it ourselves but it will be a distraction from what we are doing currently," he said.

The cargo will be carried only on AirAsia's international flights out of Kuala Lumpur.

Leisure Cargo's managing director, Ralf Auslaender, described his company as "a virtual cargo airline. We manage capacity but we do not own airlines."

He said the company has an extensive network in North America and Europe.

"Cargo will travel seamlessly within our network," Auslaender said.