Malaysian low-fares carrier AirAsia is challenging Singapore by making the border city of Johor Bahru its second hub. The carrier has also made a move into Thailand.

Kuala Lumpur-based AirAsia only started serving Johor Bahru, just across the border from Singapore, late in October with twice-daily flights to the city's Senai airport. A the time, the low-fares carrier argued that this would be "good news for not just Malaysians but also Singaporeans", giving them a low-cost alternative to get to Kuala Lumpur.

Days after launching services between Kuala Lumpur and Johor Bahru, AirAsia unveiled a major expansion from the southern city, saying Senai would be its second hub. From 3 December it will be operating non-stop services to Kota Kinabalu and Kuching in east Malaysia, as well as to the resort islands of Langkawi and Penang.

Two aircraft will initially be based at Senai from December, rising to four in January. Two daily flights will be operated to Penang, two to Kuching, one to Langkawi and one to Kota Kinabalu.

AirAsia had hoped to secure Singapore government approval for bus services between the city state and Senai airport, but Singaporean authorities have so far refused permission. They have said that if AirAsia wants to attract travellers from Singapore then it should serve Singapore itself.

The AirAsia plans come as Singapore's first low-cost airline, ValuAir, has secured financial backing from private investors to help enable a launch in the second quarter of 2004. It has also agreed to lease two Airbus A320s from Singapore Aircraft Leasing Enterprise. Separately, SIA is studying the establishment of its own low-cost unit.

With plans to expand its fleet to 20 Boeing 737-300s by the end of 2004, AirAsia is also planning to launch international services soon, and plans to start flights to the Thai resort destination of Phuket in December.

At the same time it has agreed a deal with a well-connected Thai company to set up an associate domestic carrier in Thailand. AirAsia will own 49% and its Thai partner 51%. This comes as several other groups are seeking to launch low-cost carriers in Thailand, among them Thai Airways and Orient Thai Airlines.

AirAsia's Thai plans have made the newspapers, after it was revealed that its partner in the domestic venture is Thai communications conglomerate Shin Corp, which was founded by Thailand's prime minister, Thaksin Shinawatra. Thaksin has made public comments all year that he wants to see low-cost airlines established in the country.

The new Thai carrier will also be called AirAsia and will operate 737-300s from Bangkok to other destinations in the country. Plans call for a launch in January.

Source: Airline Business