KUALA LUMPUR - Malaysia's capital will have a new S$813 million budget airline terminal by 2011, replacing the existing facility which is bursting at the seams, authorities said Friday.

The current low-cost carrier terminal which opened in 2006 with annual capacity for just 10 million passengers has become overcrowded, and lacks rail links with the city or the main airport which is 10 minutes away by car.

Malaysia Airports Holdings CEO Bashir Ahmad said the new facility will be located next to the Kuala Lumpur International Airport (KLIA) and will be able to handle 30 million passengers annually.

"The new low-cost terminal and a third runway will cost (up to) 2.0 billion ringgit (S$831 million) and we believe we can do it for less,' he told a press conference, adding it would be completed by the third quarter of 2011.

He said that the express rail link which runs from Kuala Lumpur will be extended from KLIA to the new facility.

"The terminal will be more comfortable and there will be more space for passengers, immigration facilities for foreign workers, and even a car park for 6,000 vehicles,' Bashir said.

"There is also space for expansion with another terminal for about 25 million passengers that could be built in the future.'

The budget terminal's main tenant AirAsia earlier this year unveiled plans to shift to its own airport in a neighbouring state, as frustrations rose over its shabby and overcrowded terminal.

However, the government last month vetoed the plan, saying that AirAsia's partner in the project, Malaysian conglomerate Sime Darby, had refused to contribute 800 million ringgit in construction costs.

The existing low-cost terminal was completed in just nine months, as Malaysia vied with neighbouring Singapore to see which country would be first to open its budget terminal.

However, AirAsia's business boomed unexpectedly fast as it secured more international rights than had been anticipated, and was handed many domestic routes by Malaysia Airlines during an overhaul of the national carrier.