South East Asia''s largest low-cost carrier, Air Asia, will order 25 new Airbus A320s to meet passenger demand, airline officials said on 31 August. The airline also announced plans to launch a new budget airline in Vietnam.

Officials estimate the purchase cost to be around $1.6 billion, based on the plane''s list price. Malaysia-based Air Asia posted a 41.5 per cent increase in fourth-quarter profits, on 30 August.

The airline it will team up with the state-owned Vietnam Shipbuilding Industry Corporation (Vinashin) to form Vina AirAsia, in a $30 million deal. Vinashin is presently into ship building, finance, property development and banking. It will hold a majority stake in the new airline, its first aviation venture.

A formal contract will be signed on 20 September. The new airline will begin operations in July 2008, flying to southern China from Hanoi.