AirAsia will soon buy Indonesia's Batavia Air, which is facing financial turbulence, for $US80 million ($A77 million). AirAsia is currently the region's biggest budget carrier.
The Malaysia-based airline expects to complete the acquisition, which is subject to Indonesian regulatory approval, by the second quarter of next year as it moves to strenthen its presence against fast-growing rivals.
In order to comply with Indonesian ownership law, AirAsia said it will hold 49 percent of Batavia, while 51 per cent will be held by its Indonesian unit, Fersindo as per a report in Traveller.
AirAsia chief Tony Fernandes, who recently announced he was moving to Jakarta to oversee the airline's regional expansion, described the acquisition as a "fantastic opportunity".
He said it would "accelerate our growth plans in one of the most exciting aviation markets in Asia and further underlines our belief in the growth potential of Indonesia's aviation sector".
Demand for air travel in Indonesia, an archipelago of more than 17,000 islands with a growing middle class among its 240 million population, has been soaring.
The purchase will be carried out in two stages, with the acquisition of a majority 76.95 per cent stake to be followed by the remaining 23.05 per cent held by its existing shareholders, AirAsia said in a statement.
"The total purchasing consideration for Metro Batavia Group is $US80 million and will be settled in cash," the statement added.
The carrier has been shoring up its presence in the region against a host of other competitors, including Lion Air, Indonesia's largest low cost carrier.
Batavia, which has a fleet of about 30 planes, mainly flies domestic routes and a few international routes such as to Jeddah in Saudi Arabia, Singapore and Guangzhou in southern China.
The transportation ministry said the carrier was forced to return two leased Boeing 737 airliners to its owners after failing to pay overdue bills.
Indonesia's domestic airlines carried more than 60 million passengers last year, and the Indonesia Air Carriers Association predicts a 52 per cent increase in passenger numbers by 2015.
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