Lion Air to set up budget carrier in Malaysia

Indonesia's Lion Air will set up a low-cost airline in Malaysia that will take off in May 2013 as part of an aggressive regional expansion.

The move will see Lion Air, which controls nearly half the air travel market in Indonesia, playing catch-up to the region's top budget carrier AirAsia. It follows AirAsia's recent acquisition of Batavia Air in a bid to tap Indonesia's 230 million population.

Lion Air will own 49 percent of the new airline, Malindo Airways, and Malaysia's National Aerospace and Defence Industries the remaining 51 percent.

Lion Air President Rusdi Kirana says Malindo Airways will start flying between the two countries with a fleet of 12 Boeing 737 planes in May, before expanding to other cities in Southeast Asia.