KUALA LUMPUR: AIRASIA'S budget fares will go even lower with at least a 15 per cent reduction in prices when the airline's proposed low-cost terminal opens in Labu, Negri Sembilan, in February 2011.

A senior AirAsia official said the airline's plan was always to look for a cheaper venue to lower costs as it was paying about RM100 million (S$42.2 million) in airport fees yearly to Malaysia Airports Bhd (MAB).

'MAB is charging us too much. We have been looking for another place for a long time, whether it was to buy or build a new airport,' he told The Star on Saturday.

The official said the current terminal in Sepang was only a temporary measure as it could comfortably handle only 10 million passengers yearly. By March next year, it would reach 15 million.

'AirAsia needs an airport that can handle more than 15 million by 2011,' the official said.

The Cabinet on Friday gave the greenlight for the new RM1.6 billion airport to be developed under a private finance initiative between conglomerate Sime Darby Bhd and AirAsia on a 2,800ha plot in Labu, which is between Nilai and Bandar Enstek.

The new terminal will be large enough to handle some 15 million passengers yearly and will feature a wider array of shops as part of an integrated city in Labu, comprising five townships and facilities for education, health, sports, high technology and entertainment.

Closer to the nation's capital than the current low-cost carrier terminal, a 7km link to the North-South Expressway was also slated to be built, along with an Express Rail Link to KL International Airport.

We will provide shuttles between the main terminal and LCCT. The road and rail links between KLIA and the new LCCT would also be privately financed,' the AirAsia official said.

He also said the cost of operating the new airport would be lowered by incorporating advanced technology and it being run privately without government bureaucracy.

'The airport will be built entirely by us. The latest technology and better retail facilities will mean more money. More money will mean lower airport tax and fares.'

Asked if MAB would be involved in the deal, the official said MAB was not involved in the project but did not discount the possibility that it would be made a shareholder.

According to him, the proposal was brought up by Sime Darby in the first place as they wanted an airport in the centre of a large development project - to turn the area into an Asean community hub.