AirAsia profit jumps despite 'challenging' climate

Malaysia-based AirAsia on Wednesday (Aug 20) announced a sixfold increase in second-quarter net profit as Asia's budget travel leader increased revenue despite what it called a "challenging" aviation environment.

Net profit was 367.2 million ringgit (S$145 million,US$115 million), up from 58.3 million ringgit in the same quarter of 2013. AirAsia said the jump was mainly due to foreign exchange gains on borrowings. But it said revenue also grew five per cent to 1.31 billion ringgit as passenger numbers increased slightly.

AirAsia is led by flamboyant boss Tony Fernandes, a former record industry executive who acquired the then-failing airline in 2001. It has seen spectacular success and aggressive growth under his low-cost, low-overhead model. While its rival Malaysia Airlines faces potential collapse after two disasters this year, AirAsia last month signed an agreement to buy 50 long-haul A330-900neo passenger planes from Europe's Airbus. The deal is worth US$13.75 billion at catalogue prices.

AirAsia CEO Aireen Omar attributed the second-quarter performance in part to moves to cut down on less profitable flights. She said the airline also held firm on pricing in the face of "irrational" price competition from rivals. "AirAsia continues to be disciplined in an industry where irrational competition exists," she said in a statement.

AirAsia's success has inspired a host of regional imitators. Fernandes said in a statement the outlook should improve in the second half of the year, predicting that competitors would move to more "realistic" pricing.

AirAsia said overall results in the quarter would have been better if not for losses suffered by its Thai, Indonesian, and Philippine subsidiary airlines.

Such struggles have not halted Fernandes's expansionist ways. The company announced last month it would re-enter the Japanese market in a tie-up with e-commerce giant Rakuten, jumping back into the country following its bitter split last year with All Nippon Airways over a budget carrier joint venture.

AirAsia's success over the years has come at the expense of national flag carrier Malaysia Airlines. The company has been hammered by the double disasters of MH370 and MH17 this year, compounding years of financial losses. Earlier this month a state investment fund announced it would take over Malaysia Airlines and de-list it from the stock market before a "complete overhaul" aimed at rescuing it from oblivion.

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Japan's Skymark Airlines surges on AirAsia takeover report

Skymark Airlines shares soared Tuesday (Aug 19) after a report said Malaysia's AirAsia was eyeing the struggling Japanese carrier, but both firms dismissed the story, with AirAsia's chief executive saying he had "never seen such rubbish". The Tokyo-listed stock jumped 27.77 per cent to finish at 230 yen, its maximum allowable single-day gain, on the report in Japan's leading Nikkei business daily.

The report, which cited unnamed sources, said AirAsia was in talks with its lenders over a possible takeover bid for money-losing Skymark. In a statement, AirAsia dismissed the story as "speculation" and "just another industry rumour". "Never seen such rubbish. AirAsia has no interest in Skymark in Japan," AirAsia chief executive Tony Fernandes wrote on Twitter. "There have been no discussions with Skymark."

The putative takeover target also questioned the report. "We're not aware that there is any truth in what has been reported," Skymark said in a statement.

In the wake of its bitter split last year with All Nippon Airways (ANA) over a budget carrier joint venture, AirAsia has announced it would jump back into the Japanese market in a tie-up with e-commerce giant Rakuten. The Nikkei had said the low-cost carrier might create a new local subsidiary, backed by Rakuten, to launch the bid for Skymark to get around restrictions on foreign ownership in Japanese airlines.

Skymark was born out of deregulation measures in the 1990s which were aimed at challenging ANA and rival Japan Airlines' control of the market. But the carrier has been reporting ballooning losses as new entrants into the budget sector hurt its business.

The airline was sideswiped when Airbus last month said it had cancelled a US$2.2 billion jet order with the carrier, apparently over concerns about getting paid. Skymark shares had lost more than 40 per cent at one stage following the collapsed deal.

The company said the European aviation giant had threatened it with "overpriced" penalties and called on it to merge with a bigger airline, a proposal which Skymark's top executive flatly rejected. The Nikkei report also said AirAsia, a major Airbus customer, had approached the plane maker about reducing the cancellation penalties. Skymark has said it was mulling the cutting of unprofitable routes and borrowing more money from its banks to stay afloat.

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State moves to delist Malaysia Airlines at a cost of RM1.4 billion

Malaysia Airlines will be taken over by a state investment fund under plans announced Friday, ahead of a "complete overhaul" aimed at saving the company from oblivion.

Khazanah Nasional, which already owns 70 per cent of the flag carrier, said it intends to de-list the company, purchase all minority shares - offering 27 sen per share - and finalise a restructuring plan by the end of the month. Speculation had been mounting that Khazanah would step in and steer Malaysia Airlines (MAS) off the stock exchange to give the fund a freer hand as it works to resuscitate a carrier in crisis after the double disasters of MH370 and MH17.

Flight MH370 disappeared mysteriously in March with 239 people aboard, en route from Kuala Lumpur to Beijing. No trace has been found and the airline was widely criticised for its handling of the crisis. On July 17, MH17 was shot down over Ukraine, with another 298 people killed.

Khazanah said all stakeholders will need to work together to save the company via a "complete overhaul" extending across "the airline's operations, business model, finances, human capital and regulatory environment". It added: "Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity."

The step, widely expected, requires approval from MAS's board. The airline said its operations would be unaffected in the interim.

FUTURE IN DOUBT

The 68-year-old flag carrier has haemorrhaged cash for years as it struggled to cope with intensifying industry competition. Its future solvency is now in peril as the twin tragedies have pummelled bookings.

MAS is burning through an estimated US$2 million a day as a result of its crumbling business and disaster-related costs.

Analysts said Khazanah will need to undertake a management purge and painful layoffs, and scrap major routes in order to restore the company's bottom line and global reputation. "It needs a new heart, a new brain. As it exists now, the airline is doomed," said Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics. "Each passing day is destroying its reputation and bottom line."

Earlier Friday, Malaysia Airlines had its shares suspended on the Kuala Lumpur stock exchange ahead of the Khazanah statement. Analysts had long blamed poor management, government interference, a bloated workforce, and powerful, reform-resistant employee unions for preventing the airline taking the steps need to stay competitive.

'SICK AIRLINE'

Malaysia Airlines previously had a solid safety reputation. But it lost 4.1 billion ringgit (US$1.3 billion) from 2011-13, and a further 443 million ringgit in the first quarter of this year, blaming MH370's "dramatic impact" on bookings. Analysts said taking the company private will allow Khazanah to make deep changes without shareholder interference.

But Shukor noted that previous Khazanah-sanctioned turnaround plans have failed. "I don't take comfort in Khazanah overhauling the sick airline. I am very sceptical about it," he said.

Airline experts said Khazanah should sack MAS management and bring in top-level, possibly foreign, professional managers to restore trust in the company, as Korean Airlines and Garuda Indonesia did in response to past safety-related crises. "It needs to take steps to restructure itself internally for safety considerations and procedures, and transparently communicate this to consumers. Probably new management is needed to carry all this out," said Scott Hamilton, managing director of US aerospace consultancy Leeham Co.

Costs must be slashed, possibly through staff downsizing and accelerating a pull-back from unprofitable long-haul routes that the airline has clung to for prestige, analysts add. MAS has struggled against intensifying competition from nimble, upstart budget carriers, particularly Malaysia's AirAsia.

"They may as well shut down international routes which are not making money, cut staff and sell planes. Just concentrate on the profitable domestic and key regional routes," said Mohshin Aziz, aviation analyst with Maybank. Resistance is expected from politically powerful unions. The airline employs 19,500 staff.

Ismail Nasaruddin, president of the National Union of Flight Attendants, said indications are that "a few thousand" could be laid off. "There must be an amicable solution. There must be open discussions with us on matters involving job cuts," he said.

Some have suggested a complete name change and re-branding to expunge the stigma of tragedy, but industry experts said that would accomplish little.

"Rebranding and renaming are efforts that come at significant cost, create little real value, and smooth over no part of a carrier's history," said Robert Mann, head of US-based consultancy R.W. Mann and Co.\

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Complete overhaul for crisis-hit Malaysia Airlines?

After two aviation tragedies in a matter of months, crisis-hit Malaysia Airlines (MAS) is said to be contemplating a complete overhaul, and in a deeply competitive industry where perception is everything, this may include a possible name change. However, the airline says its main concern is its staff, especially its flight crews.

When referring to their national carrier MAS, many Malaysians simply use the airline's code name MH, as MH is commonly understood to be an acronym for Malaysian Hospitality. But after the mysterious disappearance of MH370 in March and the tragic crash of MH17 four months later, the name has become associated with disaster and tragedy.

Faced with cancellations and poor ticket sales, aviation analysts are predicting MAS will last no more than five months. With the national flag carrier losing more than US$1 million a day, they say Khazanah Nasional, the government investment arm, may have to step in swiftly to stop the haemorrhage.

Mohsin Aziz, research analyst at Maybank Investment Bank, said: "It must have been a very sick airline for the past 14 years. It kept losing money. So it's definitely going to take more time before they can turn around, if ever.”

While a complete overhaul may include a leadership change, trimming of staff and reining in its powerful workers union which is resistant to reform, for now, the airline's primary focus is easing the pain of employees, especially flight crews. Morale has been badly affected with 27 crew members lost in just four months – a reality some staff are still struggling to come to terms with.

Chang Yok Lan, MAS flight attendant, said: "We just can't believe this is happening, so close to one another and it's also Malaysia Airlines." Sivakumar, another MAS flight attendant, said: "Cabin crew is family for another cabin crew compared to our family members, and this is our family because most of the time we are away – we are onboard, overseas.”

For many of the airline's staff who had been with the company for decades, what happened was beyond their comprehension but they have found strength in each other in order to continue to serve the airline they are most proud of.

Cheung Wei Ting, MAS flight attendant, said: "I think confidence plays an important part. Once we don the uniform, we know we have a duty to carry it out so we will be alright.” Chang Yok Lan said: "We have faith in our captain and we believe our safety is number one in the world. That's why we have confidence to continue to fly. "

A multi-faith prayer session was held at the airline training centre recently. The company's top management has also since disbursed US$600 to each and every MAS staff. Just like families of victims onboard its ill-fated flights, the airline and its 20,000 strong staff are also praying for closure to happen soon.

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Asia tourist boom fuels airport binge

Faced with snaking queues at immigration, overflowing baggage carousels and expensive flight delays, Asian nations are rushing to build hundreds of new airports to cope with surging demand for air travel in the region.

From China and India to the Philippines and Indonesia, the fast-growing middle classes are looking to spend their cash by spreading their wings, leading to a boom in the Asia-Pacific region's tourism sector. Airlines have responded by setting up several new budget carriers and flying new routes -- but many airports are unable to cope, forcing governments to either expand or simply build new airports.

"Through the next 10 years, we see more than 350 new airports in the Asia-Pacific and the investment cost will be well over $100 billion," said Chris De Lavigne, a global vice president at business consultancy Frost & Sullivan Asia Pacific.

"China is building over 100 airports, India is building over 60 airports and Indonesia will also have to follow suit with investments in its infrastructure," said De Lavigne, who closely tracks Asia's aviation industry.

Upgrades of existing airports could cost an additional $25 billion, he told AFP by telephone from his office in Jakarta. International tourist arrivals in Asia-Pacific grew an annual 6.0 per cent to 248 million last year, the strongest of any region worldwide, according to the UN World Tourism Organization. To cope with this, construction is being ramped up.

The Canada-based Airports Council International (ACI) said in a report that Indonesia plans to build 62 new airports in the next five years, in addition to its existing 237. Soekarno-Hatta in Jakarta is improving capacity after handling 60 million passengers last year, nearly three times what it was designed for, ACI said.

And Kuala Lumpur aims to double capacity to 100 million a year by 2020, while Hong Kong wants to handle 97 million annually by 2030, up from 60 million in 2013. In Beijing -- which already has a hub servicing 80 million people -- a second, $11 billion airport is being built to open in 2018 and handle 40 million passengers, Sydney-based consultancy Centre for Aviation said.

There are also plans for a full replacement of Manila's Ninoy Aquino International Airport, one of Asia's most notorious for overcrowding and backward facilities. Its Terminal 1, which is undergoing a major makeover, was built in 1981 to handle six million passengers a year. Together with two extension terminals, the airport handled around 30 million passengers in 2013.

Even Singapore's Changi -- regarded by many as one of the world's best -- is expanding, with a $1.0 billion Terminal 4 opening in 2017 that will raise capacity to 82 million passengers from the current 54 million. Plans are already being made for a Terminal 5.

Shukor Yusof, an analyst with Malaysia-based Endau Analytics, said airport infrastructure in many countries has lagged well behind travel growth.

"Many governments have paid scant attention to developing new terminals and new tarmacs, that's why you find that many of the airports are bursting at the seams," he said.

The focus is not just on capitals. The need for more space means much of the new construction is taking place in secondary cities, with some facilities potentially becoming hubs.

De Lavigne cited the Kualanamu International Airport in Indonesia's Medan, which opened last July and could become a hub for flights to Malaysia, Thailand, Myanmar, India and China. It was designed to handle eight million passengers a year but is already at capacity, he said.

"By 2025, they're forecasting 24 million passengers out of Medan, or a three-fold increase in just over 10 years," De Lavigne said, adding that Indonesia's aviation sector alone is growing 14-15 per cent a year.

Even less developed tourist destinations are pressing ahead with building. Myanmar -- returning to the global fold after decades of isolation -- is looking to upgrade 39 airports as tourist and domestic air passenger figures are seen surging to 30 million in 2030 from 4.2 million in 2013, the ACI said.

The government is also building a new $1.5 billion Hanthawaddy International Airport to serve as Yangon's second airport, it added.

Bangladesh is constructing a new airport costing up to $7.2 billion about 60 kilometres (37 miles) from Dhaka, ACI said. Funding from governments and the private sector does not appear to be a problem.

"There's a lot of liquidity out there. There's a lot of money in project financing," Shukor said.

Airports are now even targeting non-travellers, with the current trend for "aeroparks and aerotropolises" integrating lifestyle amenities, attracting diners and shoppers who won't even board flights.

"You get people who don't fly to come into the airports for food, shopping and other lifestyle activities. That trend which started in the West is increasingly finding its way into Asia," De Lavigne said.

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Twin tragedies push Malaysia Airlines to the brink

Any airline would struggle with the devastating impact of losing one jet full of passengers, especially if it had already been bleeding money for years.

But losing another just months later is pushing crisis-hit Malaysia Airlines to the brink of financial collapse, airline experts said, spotlighting whether it can steer its way out of extended turmoil as once-troubled carriers such as Korean Air and Garuda Indonesia did before.

The flag carrier needs an immediate intervention from the Malaysian government investment fund that controls its purse strings, and likely deep restructuring, to survive the twin tragedies of flights MH370 and MH17, analysts added.

Malaysia Airlines (MAS) was already struggling with years of declining bookings and mounting financial losses when MH370's mysterious disappearance in March with 239 people aboard sent the carrier into free-fall.

The July 17 downing of flight MH17 over Ukraine, which killed all 298 people on board, deeply compounds those woes.

"The harrowing reality for Malaysia Airlines after MH17 is that if the government doesn't have an immediate game plan, every day that passes will contribute to its self-destruction and eventual demise," said Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics.

Shukor said MAS was losing $1 million to $2 million a day, and has "the bandwidth to stay afloat for about six more months based on my estimates of its cash reserves".

While the MH17 disaster was beyond the airline's control -- pro-Russia separatists in Ukraine stand accused of shooting it down with a missile -- bookings are expected to take a further significant hit, as they did in MH370's wake.

"I'm not considering going to Malaysia in the next few years. Not unless Malaysia Airlines acts or does something in the future that will allow people to feel more relaxed about travelling there," said Zhang Bing, a Chinese national in Beijing.

Jonathan Galaviz, a partner at the US-based travel and tourism consultancy Global Market Advisors, said "perception is key in the airline industry".

"Unfortunately for Malaysia Airlines, potential international customers are now going to link the brand to tragedy," said Galaviz.

The airline already has announced refunds for ticket cancellations following MH17, which Galaviz said would cost millions of dollars. Speculation is rife that state investment vehicle Khazanah Nasional, which owns 69 per cent of the airline, will delist its shares and take it private, which could set the stage for painful cost-cutting measures and other reforms.

Analysts have long blamed poor management, government interference, a bloated workforce, and powerful, reform-resistant employee unions for preventing the airline from remaining competitive.

MAS lost a combined 4.1 billion ringgit ($1.3 billion) from 2011-13. It bled a further 443 million ringgit in the first quarter of this year, blaming MH370's "dramatic impact" on bookings. Khazanah declined to comment on future plans for the airline.

But writing in Britain's Sunday Telegraph on Sunday, Hugh Dunleavy, Malaysia Airlines' commercial director, stated that the carrier "will eventually overcome this tragedy and emerge stronger".

The Malaysian government had begun to speed up its review of the airline's future -- started after the disappearance of MH370 -- following the second tragedy, Dunleavy wrote.

"There are several options on the table but all involve creating an airline fit for purpose in what is a new era for us, and other airlines. With the unwavering support we have received from the Malaysian government, we are confident of our recovery, whatever the shape of the airline in future," he wrote.

Other airlines have risen from the ashes, lessons that could be instructive for MAS, experts said.

Indonesia's state-owned Garuda Indonesia was plagued by a series of problems in the 1990s and early 2000s, including heavy debts and the murder of a prominent human rights campaigner mid-air in 2004.
Safety problems also blighted its image, including a 1997 crash on Sumatra island that killed all 234 aboard and remains Indonesia's deadliest air disaster.

Former banker Emirsyah Satar was appointed in 2005 to turn around the airline, and he undertook a massive exercise to nurse it back to health. In 2010, it was named the world's most improved airline by London-based consultancy Skytrax.

Korean Air was in trouble after a period during the 1980s and 1990s when several accidents left more than 700 people dead. It embarked on a major reform push, bringing in retired Delta Air Lines vice-president David Greenberg in 2000, who subsequently revolutionised its safety and operational practices. Korean Air is now widely respected worldwide.

Shukor said Malaysia's government and Khazanah face a "mammoth task" but that the airline could learn much from carriers that have faced similar challenges.

"Its name is now synonymous with disaster, mismanagement, lack of discipline and many negative elements," he said.

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Malaysian jet with 298 on board crashes in Ukraine

A Malaysian airliner carrying 298 people from Amsterdam to Kuala Lumpur crashed on Thursday in strife-torn east Ukraine, with US officials saying it was shot down by a surface-to-air missile.

Ukraine's government said the jet was shot down in a "terrorist act", while comments attributed to a pro-Russia rebel chief suggested his men may have downed Malaysia Airlines flight MH17 by mistake, believing it was a Ukrainian army transport plane.

Russian President Vladimir Putin meanwhile said Kiev bore responsibility for the crash, which came as Ukrainian forces battle pro-Moscow insurgents in the east of the country.

As Malaysian investigators headed to the scene, the UN Security Council called an emergency session on Friday to discuss the disaster -- the second to strike the airline in just four months.

Shocked world leaders called for an international inquiry to determine the causes of a disaster with potentially far-reaching political implications, with Britain demanding a UN-led probe.

There was no sign of survivors at the crash site, where an AFP reporter saw horrific scenes, with dozens of mutilated corpses and body parts strewn through the smouldering wreck of the Boeing 777.

Charred debris stinking of kerosene stretched for kilometres across the rebel-controlled zone in the Donetsk region. A top rebel leader said his forces were prepared to agree to a short ceasefire to allow for the recovery operation.

Shell-shocked locals said the impact felt "like an earthquake" in their village of Grabove, near the Russian border.

"Those poor people," said Natalia, 36. "Do you think they understood a thing about this war in Ukraine -- even we don't understand it."

At Amsterdam's Schiphol airport, from where the ill-fated jet took off, an AFP reporter saw family members in tears, while Dutch television broadcast harrowing images of passports found in the wreck, including those of children.

Europe's flight safety body Eurocontrol said Ukrainian authorities had closed the airspace over the east of the country, after a string of countries advised their carriers to stay away.

In Amsterdam, Malaysia Airlines vice president Huib Gorter said 283 passengers and 15 crew were aboard the plane. That total included 154 Dutch nationals, 27 Australians and 23 Malaysians.

The airline said on Twitter that Ukrainian air traffic controllers lost contact with the plane at 1415 GMT, about four hours into its flight, some 50 kilometres (30 miles) from the Russia-Ukraine border.

The disaster comes just months after Malaysia's Flight MH370 disappeared on March 8 with 239 on board. That plane diverted from its Kuala Lumpur to Beijing flight path and its fate remains a mystery despite a massive multinational aerial and underwater search.

Malaysia's Prime Minister Najib Razak said on Twitter he was "shocked by reports that an MH plane crashed" and announced an "immediate investigation."

Najib later told reporters a team of investigators had been dispatched to Kiev, along with a disaster assistance team.

Europe and US stock markets were sent tumbling by the crash, which escalated tensions fuelled by broadened US and EU sanctions aimed at pressuring Russia to force the rebels in Ukraine's east to end their three-month insurgency that has claimed more than 600 lives.

US President Barack Obama offered assistance to "help determine what happened and why".

Boeing also said it was ready to assist in any way.

The Kremlin said Putin and Obama -- at loggerheads over the new wave of sanctions -- had discussed the crash. Obama later called Ukrainian President Petro Poroshenko and Najib.

Two US officials told AFP that intelligence analysts were reviewing the data to see whether the missile used to down the aircraft was launched by pro-Moscow separatists, Russian troops across the border or Ukrainian government forces.

"We are working through all the analysis," said one official.

But that there was little doubt that the plane was struck by a surface-to-air missile, the official said.

"That's what we strongly believe."

In Detroit, US Vice President Joe Biden said the plane was "apparently... and I say apparently because we don't have all the details yet... shot down. Not an accident. Blown out of the sky."

There were conflicting claims of responsibility after the shocking new development in crisis-torn Ukraine, where fighting between separatists and the Western-backed government has claimed over 600 lives.

Poroshenko's spokesman said he believed pro-Russian insurgents downed the jet.

"This incident is not a catastrophe. It is a terrorist act," the spokesman, Svyatoslav Tsegolko, said on Twitter.

The Ukrainian leader said Kiev's armed forces "did not fire at any targets in the sky" and vowed "those behind this tragedy will be brought to justice".

Rebels in the self-proclaimed Lugansk People's Republic claimed the airline split in two after being shot down by a Ukrainian jet -- which was then shot down in turn.

But a social media site attributed to the top military commander of the Donetsk People's Republic, Igor Strelkov, said the insurgents shot down an army transporter at the exact site of the Malaysia Airlines crash.

The comments suggested separatists targeted the jet in the mistaken belief it was an An-26 Ukrainian army transport plane.

"We just downed an An-26 near Torez. It is down near the Progress mine," said the VK page attributed to Strelkov.

"And here is a video confirming that a 'bird fell'," said the post, providing a link identical to that published by Ukrainian media in reports about the Malaysia Airlines jet.

Alexander Borodai, prime minister of the self-proclaimed "Donetsk People's Republic", meanwhile told AFP that separatist forces would be ready to commit to a truce for several days to allow full access to the site.

The crash came with tensions already soaring after Kiev accused Russia of downing a Ukrainian military plane on a mission over the east of the country on Wednesday, the first direct claim of a Russian attack on Ukrainian forces.

Russia's defence ministry -- which NATO claims has massed some 12,000 troops along Ukraine's porous border -- dismissed the claim as "absurd", news agencies reported.

The dramatic developments on the ground came alongside the already serious fallout from fresh US and EU sanctions slapped on Russia.

Moscow condemned the measures as "blackmail" and warned of retaliatory action against Washington, which targeted major players in Russia's finance, military and energy sectors in the sanctions.

In eastern Ukraine, fierce fighting has intensified in recent days with some 55 civilians killed since the weekend, as efforts to revive talks on a ceasefire between Kiev and the rebels falter.

Ukrainian forces made a string of major gains after Poroshenko tore up an unsuccessful truce earlier this month, but progress has slowed since rebels retreated into two major regional centres where they have pledged to fight to the end.

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AirAsia X intends to buy 50 Airbus A330-900neo planes

Malaysian airline AirAsia X on Tuesday signed an outline agreement to buy 50 long-haul A330-900-neo passenger planes from Airbus, the European planemaker said.

The deal is worth $13.75 billion (10.11 billion euros) at catalogue prices and deliveries are due to start in 2018, Airbus said on the second day of the Farnborough airshow near London.

Plans for the neo, a new version of the long-standing A330 thanks to upgraded engines, were launched by Airbus at the key industry event on Monday.

"AirAsia X, the long-haul affiliate of Asia's largest low-cost airline (Air Asia), has signed a memorandum of understanding with Airbus for 50 A330-900neo aircraft," said a statement.

"The agreement sees the airline become a launch customer for the latest version of the best-selling wide-body. AirAsia X will also be one of the first operators of the aircraft," Airbus added.

Airbus's main rival Boeing, ahead of the show, raised its forecast for industry aircraft sales over the next two decades to $5.2 trillion, driven largely by demand from low-cost carriers.

AirAsia co-founder Tony Fernandes said the neo was the aircraft "we truly need to develop (to) further our low-cost, long-haul model".

"I think this is going to be a remarkable plane," he told a press conference at Farnborough.

Airbus chief executive Fabrice Bregier said lower fuel consumption, extended long range capability and competitive acquisition costs will make the A330neo "a true game changer" for the aviation industry.

Airbus has managed to win outline agreements for 105 A330 neo planes in the first two days of Farnborough, exceeding its target of 100 sales with several days of the event to go. The other deals were agreed with aircraft leasing companies. In total the European aircraft maker has sealed $25 billion of orders for its passenger planes at the show.

Airbus has said that the A330neo, a rival to the 787 Dreamliner made by US rival Boeing, will be available in two versions: the A330-800neo and the A330-900neo. The neo is expected to cut fuel consumption by 14 per cent per seat compared with existing A330s, while deliveries will start in the fourth quarter of 2017.

Airbus has sold about 1,300 A330s, of which the vast majority are still in service since the model's launch in 1993. The group has forecast sales of the A330neo at potentially more than 1,000 units.

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MH370 search yet to target most likely crash site: Inmarsat

The search for Malaysian Airlines Flight MH370 is yet to target the most likely crash site after being distracted by what are now believed to be bogus signals, British company Inmarsat claimed Tuesday.

Inmarsat's scientists told the BBC's Horizon programme that they had calculated the plane's most likely flight path and a "hotspot" in the southern Indian Ocean in which it most likely came down.

The flight lost contact on March 8 en route from Kuala Lumpur to Beijing with total of 239 passengers and crew on board.

Hourly pings sent by the plane were received by Inmarsat's spacecraft, leading scientists to calculate its likely path.

Australian naval vessel Ocean Shield was dispatched to investigate, but before reaching the likely site it began to detect a signal that it believed was coming from the plane's black box, Inmarsat said.

Two months were spent searching 850 square kilometres (330 square miles) of sea bed northwest of Perth, but the source of the "pings" was not found and a submersible robot found no evidence of the airliner.

"It was by no means an unrealistic location but it was further to the northeast than our area of highest probability," Chris Ashton at Inmarsat told Horizon.

Experts from the satellite firm modelled the most likely flight path using the hourly pings and assuming a speed and heading consistent with the plane being flown by autopilot.

"We can identify a path that matches exactly with all those frequency measurements and with the timing measurements and lands on the final arc at a particular location, which then gives us a sort of a hotspot area on the final arc where we believe the most likely area is," explained Ashton.

Australia's Joint Agency Coordination Centre (JACC), established to manage the search, said the four acoustic "pings" picked up by the black box detector attached to Ocean Shield had to be pursued at the time.

"The four signals taken together constituted the most promising lead in the search for MH370 and it was a lead that needed to be pursued until completion so the search team could either discount or confirm the area as the final resting place of MH370," JACC said in a statement to AFP.

Australian officials agree that a linear arc produced using the satellite messages, or "handshakes", leading to the southern Indian Ocean likely represents the plane's flight path.

But the Australian Transport Safety Bureau said experts were still working to define the area to be scoured in the next phase of the search, which will plunge ocean depths of up to 6,000 feet.

"The search strategy group is continuing its analysis of satellite and aircraft performance data, along with a range of other information, to determine the area that offers the highest probability of finding the aircraft," a spokesman said.

"This is highly complex work that requires significant collaborative effort with international specialists. The revised search zone is expected to be available in the coming weeks."

Malaysia's civil aviation authority and Inmarsat last month released the raw satellite data after coming under criticism from relatives over the fruitless search.

However, its complexity has led to few independent conclusions being drawn about the likely crash site.

Malaysian Selamat Umar, whose son Mohamad Khairul Amri was on the ill-fated jetliner, questioned the motives behind the data release.

"I am not convinced at all by the data," he said. Why are they releasing it now? Before when we asked for it, they did not want to release it. What can we do with it now?" he said.

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MAS retires Boeing 737-400 from its fleet

Malaysia Airlines (MAS) retired the Boeing 737-400 passenger aircraft from its fleet Saturday night, 22 years after it entered the carrier's service in 1992.

The last 737-400 series flight touched down in Kuala Lumpur International Airport (KLIA) at 9.31pm Saturday, after taking off from the Bayan Lepas airport in Penang at 8.41pm.

It carried 85 passengers and was served by 10 cockpit and cabin crew.

Capt Wan Muzainal Wan Mahazir, 42, who piloted the aircraft, said he and his crew had fond memories of the 737-400.

"It has been a good, memorable 22-odd years that the 400 series has been servicing MAS.

"(We) still have vivid, fond memories from when we started our early days training on the 400 series, 20 years ago," he told reporters here.

He added that the 400 series would be replaced by the 737-800 series, of which there are 53 planes currently in service.

MAS chief executive Ahmad Jauhari Yahya said the 737-400 had an exemplary safety record.

"It's like the retiring of an old friend," he said, adding that MAS would be banking on the 800 series to ply the routes previously serviced by the 400 series.

Ahmad said the 800 series saves 15 per cent to 20 per cent more fuel compared to the 400 series, and could fly for five hours one-way.

Ahmad said MAS expected to see more deliveries of the 800 series this year and the next, with a total of 64 of the aircraft by year-end 2015.

MAS had eight of the 737-400 in service before they retired it.

The Boeing 737-400 entered MAS' service in May 1992, and at one point ran 54 of the aircraft, making the company the largest operator of the model outside the United States.

Commenting on the 100-day anniversary of the MH370 incident Sunday, Ahmad said the search was still underway and that efforts were ongoing, by all parties involved.

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Malaysia Airlines union urges CEO to resign

Malaysia Airlines' workers' union called on Thursday for the struggling carrier's top managers to step down, piling further pressure on the beleaguered company with the fate of Flight MH370 still unknown almost three months on.

The union will urge the government not to renew the contract of MAS chief executive Ahmad Jauhari Yahya, believed to be expiring in September, said the union's executive secretary Jabbarullah Kadir.

Two other senior managers should also resign to revive the loss-making state-controlled national carrier's fortunes, he added.

"Their business plan to turn around the airline hasn't worked. For us they totally failed to carry out their duty," Jabbarullah said.

He said the union had rallied behind MAS over the jet that vanished flying from Kuala Lumpur to Beijing on March 8 carrying 239 people but that staff morale was "very low" over the carrier's poor financial performance.

The influential union represents about half of Malaysia Airlines' 19,500 worldwide employees and was instrumental in blocking a tie-up with rival budget carrier AirAsia three years ago.

Malaysia Airlines said earlier this month that MH370's disappearance had had a "dramatic impact" on earnings.

The carrier has struggled amid intense competition, losing $1.3 billion over the past three years before the impact of MH370 is taken into account.

For this year's first quarter the airline posted a net loss of 443 million ringgit ($137 million).

It was the fifth straight quarter loss and the worst since the fourth quarter of 2011 when it recorded a net loss of 1.28 billion ringgit.

No trace of MH370 has been found despite an extensive search in the southern Indian Ocean where it is believed to have come down.

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MH370 pushes troubled Malaysia Airlines to wider Q1 loss

Malaysia Airlines announced Thursday that its net loss widened in the first quarter as the impact of flight MH370's disappearance added to the struggling carrier's woes.

The state-controlled airline said it posted a net loss of 443 million ringgit ($137 million) for the three months ending March 31, compared to a 279 million ringgit loss in the same quarter in 2013.

The result was the airline's fifth straight quarterly loss and also the worst since the fourth quarter of 2011, when it recorded a net loss of 1.28 billion ringgit.

"The results were made worse with the impact on air travel in general following the disappearance of MH370," said Ahmad Jauhari Yahya, the airline's group chief executive.

"Operations were slowed for several weeks since early March when MH370 disappeared. Marketing activities were halted out of respect for the families of those on board the Beijing-bound Boeing 777 aircraft."

The debacle over the missing plane has compounded the problems faced by Malaysia Airlines, which had already lost a combined $1.3 billion over the past three calendar years as it founders in the face of intense industry competition.

Analysts say it faces a continued grim outlook in coming years unless it is forced to undergo aggressive reform, which has been resisted by powerful employee unions and other vested interests.

In a statement on Wednesday, the airline said "a thorough review of the business plan is being undertaken and all avenues are being explored to ensure the long-term sustainability of the company."

The carrier has undertaken a series of "turnaround" plans over the years, but each has failed to stem the tide of red ink blamed by analysts on poor management, a bloated work force, powerful unions, and industry competition.

MH370 disappeared on March 8 en route from Kuala Lumpur to Beijing with 239 people aboard. An extensive search in the Indian Ocean has found no trace of the plane.

The incident has ravaged the carrier's worldwide image and especially hurt bookings in the lucrative and previously growing China market.

Two-thirds of those on board MH370 were Chinese and the crisis has triggered fierce criticism in China of the airline and Malaysia's government.

The airline, which is 69 per cent owned by government investment company Khazanah Nasional, said the first quarter loss was due in part to rising fuel costs.

Ahmad Jauhari said the airline must find ways to boost revenue to ensure its "future survival and sustainability in a market that is not showing any signs of letting up on competition", but he offered no specifics.

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Malaysia’s new budget airport takes off

The Kuala Lumpur International Airport 2 (klia2), which Malaysia calls the world's largest purpose-built low-cost terminal for low cost carriers, officially commenced operations on Friday with the arrival of Malindo Air Flight OD1027 from Kota Kinabalu at 12.05am.

The first aircraft to take off from the airport was a Cebu Pacific Airways flight (Flight 5J502) to Manila with time of departure of 3.15am.

Present at the airport to witness the historic moment were Deputy Transport Minister Abdul Aziz Kaprawi, Malaysia Airports Holdings Bhd (MAHB) chairman Dr Wan Abdul Aziz Wan Abdullah, MAHB managing director Bashir Ahmad and Department of Civil Aviation (DCA) director general Azharuddin Abdul Rahman.

'Goodie bags' distributed to the 110 passengers of the Malindo Air flight were also given to the 147 passengers on the Cebu Pacific Airways flight.

Earlier at 10.20pm on Thursday, the check-in process began and proceeded without any hitches.

The first passenger to check in, Gemma Camarinta, 39, who was travelling to her hometown in Bohol, Philippines said she was happy and excited to be part of the historical event.

A frequent user of the previous Low Cost Carrier Terminal (LCCT), she said the new hub was more comfortable, and easier to reach where one could use the Express Rail Link (ERL) straight to the terminal.

Another passenger, Ace Perez, 30, said compared to the LCCT, klia2 was much better because it was spacious, comfortable and clean.

"I like the route because it is easily reached from the highway. I am happy with this new building compared to LCCT because there, I had to walk very far to get to the aircraft," he said.

Meanwhile, MAHB in a statement said airlines starting to operate from klia2 on Friday were Malindo Air, Cebu Pacific Airways, Lion Air and TigerAir while AirAsia will move to klia2 by May 9.

MAHB expects 7,000 passenger traffic movements daily for the initial phase of operations, and 50,000 passenger traffic movements from May 9 onwards.

Gatewayklia2, which duals as a public transportation hub that has a fully gated car park which can accommodate 6,000 vehicles, ERL, taxi and bus service, and retail mall of 350,000 sq ft with over 200 outlets also commercially opened to the public on Friday, according to the statement.

MAHB said the LCCT will cease operations after May 9, and for the convenience of passengers, complimentary shuttle bus service between klia2 and LCCT will be provided from May 1 until May 15, and is available every 15 to 20 minutes.

The immigration, security and customs counters at LCCT will also continue to operate until May 9, and passengers are advised to contact their respective airlines to confirm details of their flights to avoid any inconveniences.

The klia2 is designed to handle 45 million passengers a year, replacing the LCCT which had a capacity for only 15 million passengers a year.

At a press conference after the arrival of the Malindo Air flight, Abdul Aziz said the opening of the terminal went very smoothly and as planned.

"We have proven that everything would proceed as scheduled as we had announced before. We are proud as this (klia2) has become the latest Malaysian icon," he said.

Abdul Aziz said the cost of the terminal was within the RM4 billion budget which had been allocated earlier, and that a total of 22 million passengers were expected to use the terminal this year.

He said the government was optimistic that more airlines would want to set up their operations there in the future.

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Malaysia opens new budget airport on Friday

Malaysia this week opens what it calls the world's largest airport built specifically for low-cost airlines, a project driven by budget travel's phenomenal growth but which debuts under the shadow of missing flight MH370.

The $1.2 billion facility near the main Kuala Lumpur International Airport (KLIA) was originally targeted to open three years ago but has been hit by repeated delays, amid concerns over safety and subpar construction, even as costs have doubled.

But the new KLIA2 budget terminal will begin operations Friday with an initial 56 flights, increasing the load as airlines move full operations over from a nearby existing facility in coming days.

Analysts and the travelling public agree the opening of a new budget terminal is long overdue.

The current low-cost terminal is a cramped and bare-bones facility that resembles a bus station. Capacity is 15 million passengers, but about 22 million squeezed through last year.

The gleaming KLIA2 meanwhile covers an area equal to 24 football fields, authorities said, about four times the size of the facility it is replacing.

Its modern design features soaring ceilings, natural lighting, people-mover belts and improved connectivity with access to an existing express airport train to Kuala Lumpur 50 kilometres (31 miles) away.

Malaysia-based Malindo Air, the Philippines' Cebu Pacific Air, Singapore's Tiger Airways, and Indonesia's Lion Air and Mandala Airlines will begin initial operations there Friday.

Regional low-cost leader AirAsia plans to join them by May 9, when the old terminal is due to close.

About 24 million passengers are expected to pass through KLIA2 in the first 12 months, and annual capacity is 45 million. Current capacity at the main KLIA terminal is roughly 40 million, but expansion plans are in the works.

"KLIA2 will cement Kuala Lumpur's position as a thriving hub for both low-cost and full-service travel," said Bashir Ahmad, managing director of state-linked airport operator Malaysia Airport Holdings Berhad (MAHB) which built KLIA2.

Kuala Lumpur has been at the core of a regional budget-travel boom credited in large part to Malaysia-based AirAsia.

The once-failing airline was acquired in 2001 by outspoken Malaysian entrepreneur Tony Fernandes.

He quickly turned it into one of the aviation industry's biggest success stories, its rapid regional growth helping to broaden a market that has benefited a host of Asian competitors.

"AirAsia is the driving force behind this growth because of its size and its ability to attract travellers with its price-sensitive tickets," said Shukor Yusof, an aviation analyst with Malaysia-based Endau Analytics.

"KLIA2 will serve as a catalyst to propel air travel in Asia, which is experiencing robust growth."

But the still-unexplained March 8 disappearance of Malaysia Airlines flight MH370, which took off from the main KLIA, has raised worldwide concern over Malaysian aviation and focused attention on KLIA2's problems.

Its delays and rising costs triggered an ongoing inquiry by a parliamentary committee and accusations last month by impatient AirAsia officials of "many concerns, especially on functionality, safety and security."

These included depressions on runways and taxiways, said the airline, which threatened not to move in. MAHB has acknowledged KLIA2 is on unstable ground that will require years of upkeep.

Malaysia's government is accused of presiding over a crony capitalist system often blamed for frequent problems and unexplained cost overruns in big projects.

Fernandes has previously accused the government of favouring loss-making flag carrier Malaysia Airlines over profitable rivals like AirAsia.

But AirAsia agreed in mid-April it would move over to KLIA2 after the government said the International Civil Aviation Organisation (ICAO) would inspect the facility.

Malaysia said last week ICAO approval was given.

"I would like to confirm that KLIA2 is safe," Transport Minister Hishammuddin Hussein told reporters last week.

Fernandes declined comment.

Shukor said the Asian budget-travel segment had roughly tripled over the past decade to about 50-70 million passengers in 2013, or about 20 percent of regional air traffic.

The expanding Asian middle class means the market can expect further "robust growth of up to 10 percent annually, especially with the launch of KLIA2."

Pushing a baggage trolley, Agnes Tay, 33, a financial manager for Adidas who was among volunteers in a recent KLIA2 trial run, called the terminal "a breath of fresh air."

"It is clean and I feel safe. It will make me fly more often," Tay said.

Malaysia hopes KLIA2 will help increase and broaden the flow of tourists to the country. Nearly 26 million came in 2013, the vast majority driving over from neighbouring Singapore.

MH370 has cast a cloud over hopes of increasing fast-growing arrivals from China, Malaysia's third-largest source of tourists.

Two-thirds of the 239 people on MH370 were from China and tens of thousands of Chinese have cancelled plans to visit.

But analysts said long-term effects are not expected.

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Malaysia Airlines jet in emergency landing after tyre bursts

A Malaysia Airlines plane with 166 people aboard was forced to make an emergency landing in Kuala Lumpur early on Monday in another blow to its safety image after the loss of flight MH370.

Flight MH192, bound for Bangalore, India, turned back to Kuala Lumpur after it was discovered that a tyre had burst on take-off, the airline said.

"As safety is of utmost priority to Malaysia Airlines, the aircraft was required to turn back to KLIA (Kuala Lumpur International Airport)," the airline said in a statement.

The plane landed safely at 1:56 am (1756 GMT), nearly four hours after it took off, the flag carrier said.

"All 159 passengers and 7 crew members on board have disembarked from the aircraft."

The airline said tyre debris discovered on the runway had led to the decision to bring the Boeing 737-800 aircraft back.

"They have landed safely -- thank God," tweeted Transport Minister Hishammuddin Hussein, who is overseeing Malaysia's response to MH370.

The airline is still reeling from the loss and presumed crash of flight MH370, which disappeared March 8 while en route from Kuala Lumpur to Beijing.

MH370 inexplicably diverted and is now believed to have crashed into the remote Indian Ocean with 239 people aboard.

Hishammuddin had tweeted that MH192 went into a holding pattern as other reports quoted officials saying it would only be allowed to land once all of its fuel had been burned off.

MH192's passengers would be accommodated in local hotels and the flight was re-timed to take off at 3:30 pm local time on Monday, the airline said.

Malaysia Airlines had previously enjoyed a good safety record, as did the Boeing 777 aircraft used for MH370.

An Australian-led multi-nation search effort is now scouring a remote area of the Indian Ocean for wreckage from flight MH370 in a bid to confirm its fate and hopefully recover the flight data recorders to determine what happened to it.

No surface debris has been found despite a month of searching, but search crews had earlier picked up signals believed to be from the beacons of the plane's data recorders.

A US Navy submersible sonar scanning device is now being deployed to look for wreckage on the seabed at depths of around 4,500 metres (15,000 feet) or more.

Nothing has yet been found and authorities have indicated they may reassess within days how to approach the extremely challenging search -- expected to be the costliest in aviation history with estimates of more than $100 million.

Malaysia's government and the airline have come under harsh criticism from Chinese relatives of MH370 passengers -- two thirds of its 227 passengers were from China -- who have alleged a bungling response and cover-up.

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MH370 search estimated to be US$100m, the costliest ever

The search for missing Malaysia Airlines Flight MH370 is set to be the most expensive in aviation history, analysts say, as efforts to find the aircraft deep in the Indian Ocean show no signs of slowing.

The Boeing 777 vanished on March 8 with 239 people on board, after veering dramatically off course en route from Kuala Lumpur to Beijing and is believed to have gone down in the sea off Australia.

Australia, which is leading the search in a remote patch of water described as "unknown to man", has not put a figure on spending, but Malaysia has warned that costs will be "huge".

"When we look at salvaging (wreckage) at a depth of 4.5 kilometres, no military out there has the capacity to do it," Acting Transport and Defence Minister Hishammuddin Hussein said Thursday.

"We have to look at contractors, and the cost of that will be huge."

Ravikumar Madavaram, an aviation expert at Frost & Sullivan Asia Pacific, said Malaysia, Australia and China, which had the most nationals onboard the flight, were the biggest spenders and estimated the total cost up to now at about US$100 million.

"It's difficult to say how much is the cost of this operation... but, yes, this is definitely the biggest operation ever (in aviation history).

"In terms of costs this would be the highest," he told AFP.

In the first month of the search -- in which the South China Sea and Malacca Strait were also scoured by the US, Malaysia, Singapore and Vietnam -- the Pentagon said the United States military had committed US$7.3 million to efforts to find the plane.

Meanwhile the Indian Ocean search, in which assets have also been deployed by Australia, Britain, China, South Korea, Japan and New Zealand, has failed to find anything conclusive.

Hopes rest on a torpedo-shaped US Navy submersible, which is searching the ocean floor at depths of more than 4,500 metres in the vicinity of where four signals believed to have come from black box recorders were detected.

David Gleave, an aviation safety researcher at Britain's Loughborough University, said the costs "will be of the order of a hundred million dollars by the time we're finished, if we have found it (the plane) now".

But he said the longer it took to find any wreckage, the more costs would mount because scanning the vast ocean floor "will take a lot of money because you can only search about 50 square kilometres a day".

Salvaging anything would also depend on how deep the ocean is at the crash point and how dispersed the wreckage, with weather and politics also complicating factors, he said.

The fate of MH370 has drawn parallels with the hunt for Air France Flight 447 which plunged into the Atlantic in 2009.

The two-year operation to recover its black box, which involved assets from France, Brazil and the US, has been estimated to have cost 80-100 million euros, according to figures cited by France's Investigation and Analysis Bureau (BEA).

Australia's Joint Agency Coordination Centre says its main focus is still on finding flight MH370.

"It is one of the most difficult searches ever undertaken and could take some time," JACC said in a statement to AFP.

"The cost of the search is significant. The exact figure has not yet been calculated.

"The cost is being shared by our international partners who have contributed their people and military and civilian assets to help with the search."

As the search continues, all international partners are meeting their own costs. But governments and militaries will need to consider the broader cost implications of the search down the track, said Kym Bergmann, editor of Asia-Pacific Defence Reporter.

"I don't think that the Australians would be getting any change at all out of A$1 million day," he told AFP.

Bergman said it would likely be the most expensive aviation search given how long it had already dragged on.

"It must be starting to worry military planners," he said, adding that any decision to scale back would cause heartache to the families involved.

Malaysia-based Madavaram agreed, saying at present it was still "politically insensitive" to cut spending.

"I think they will continue one or two months irrespective of the costs," he said. "But then if nothing is found, it will become a wild goose chase, and people will start questioning it.”

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AirAsia agrees to move to troubled new Malaysia airport

Malaysian budget airline AirAsia said on Tuesday it would move to a much-delayed new international terminal set to open next month despite recently criticising it as rife with safety issues and other problems.

The facility near Kuala Lumpur International Airport (KLIA) is being touted by Malaysian authorities as the world's largest low-cost airline terminal.

But the so-called "klia2" has been hit by repeated delays, construction problems and costly overruns that have sparked a parliamentary investigation and harsh criticism by AirAsia directed at the state-linked Malaysian airport operator building the terminal.

However, AirAsia, which has rapidly become one of the world's top budget airlines, said in a statement Tuesday it was now satisfied with the government's commitment to safety after authorities said the International Civil Aviation Organization (ICAO) would be brought in to evaluate klia2.

"This decision reflects the priority that the government is giving to the issue of safety, and assuring the public that klia2 is safe," it said in a statement, adding it would move into the facility for its May 9 opening.

AirAsia had said two weeks ago it would not move in unless "unresolved pressing issues" were addressed, including "depressions" on the runway it said were discovered by independent inspectors.

AirAsia has also complained that it was shut out of decision-making, despite being the facility's biggest and most important future tenant.

Its concerns raised further questions about aviation safety in the country as authorities struggle with the crisis of missing Malaysia Airlines flight MH370.

AFP was unable to reach AirAsia officials immediately for comment on the sudden about-face.

AirAsia group boss Tony Fernandes said on his Twitter feed that "some good progress" had been made on klia2.

The facility is being built by the country's airport operator, Malaysia Airports Holdings Bhd (MAHB).

MAHB has said carriers will have to move in by May 9, when it plans to close an existing low-cost terminal nearby which handled 22 million passengers last year.

The klia2 terminal was originally due to open in 2011 but has been repeatedly delayed, and its price tag has doubled to $1.2 billion.

MAHB has previously acknowledged klia2 is located on unstable ground that may settle, and that the facility could require years of resulting upkeep.

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Malaysian carrier Malindo Air catches fire mid-air

A Malindo Air flight bound for Kuala Terengganu had to turn back to the Subang Airport on Wednesday morning after one of its engines caught fire.

The hybrid airline, in a statement, said the incident occurred as the aircraft climbed to about 7,000 feet (2,334 metres) soon after it took off at 7.30am.

It said the aircraft fire detection system was activated and the crew immediately carried out an emergency standard operating procedure to contain the situation.

"The captain decided to turn back to Subang and the aircraft landed safely at the airport. No one was hurt.

"All the passengers were later transferred to another flight for Terengganu," it said.

Malindo Air said the cause of the fire was being investigated and the incident was reported to relevant authorities, including the engine and aircraft manufacturer.

It was learnt that Terengganu footballers were among the passengers onboard.

They were returning home after their Super League match against the Armed Forces at the Selayang Stadiumon Tuesday night. Terengganu won 3-0.

A picture of the burning engine posted on a social media site by Terengganu midfielder Mohd Faiz Subri on Wednesday morning went viral.

The Terengganu Football Association website said the team took a replacement flight back to Kuala Terengganu at 10am.

Headquartered in Petaling Jaya, Malindo Air is a joint venture between National Aerospace and Defence Industries (Nadi) of Malaysia and Lion Air of Indonesia.

Midfielder Mohd Faiz, 28, said the passengers had the fright of their life when they heard an explosion, after which they saw one of the plane propellers catching fire just after taking off.

"I could only pray that nothing bad would happen to us. Furthermore, it was the first time I encountered this kind of emergency.

"All of us were quite in a panic, but the pilot and crew acted professionally to calm us down," he told Bernama at the Sultan Mahmud Airport on Wednesday.

Defender Mohd Zubir Azmi, 26, said he became frightened and nervous as he thought of the fate of passengers and crew of the ill-fated Malaysia Airlines flight MH370.

"After the plane landed safely in Subang we thought of going back to Terengganu by bus, but we took the replacement flight at 11.15am anyway," he said.

Commending Malindo Air crew for their professionalism, another passenger, Dietmar Gierlich, 31, who was on a work trip, said: "The crew asked the passengers not to panic and took very fast action. The passengers also co-operated well with the crew and every one had made things easier."

Dismissing a suggestion that he will not be flying by Malindo Air again, he said, "The situation could happen to anyone or any plane in the world."

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AirAsia boss lets rip at Malaysian Airlines, aviation authorities

Flamboyant AirAsia boss Tony Fernandes savaged state-backed flag carrier Malaysian Airlines (MAS) and the nation's aviation authorities on Wednesday, accusing them of mismanagement that was harming the travelling public.

The budget airline mogul posted the comments on his Twitter feed a day after fierce rival MAS announced it had lost a whopping 1.17 billion ringgit ($355 million) in 2013.

"AirAsia Allstars, take a bow. Malaysia Airlines lost over a billion," Fernandes tweeted.

"So much money wasted. If people were more efficient Malaysians would spend less on travel."

Fernandes bought ailing AirAsia in 2001, quickly turning it around with his no-frills, low-fare formula.

AirAsia has put severe pressure on inefficient MAS, which analysts say is hampered by poor management, bloated and demanding unions and government interference.

On Tuesday, MAS also reported its fourth straight quarterly loss and warned of a "challenging" year ahead.

The airline has bled money in recent years and announced a series of turnaround plans, but the poor earnings have continued.

"I wonder if it's fair that Malaysia Airlines can lose so much money and protect its market share. Can only do that with taxpayers money," Fernandes tweeted.

The outspoken Fernandes also took aim at Malaysian regulators, implying they were seeking to hinder MAS' competition.

"Imagine how many jobs AirAsia could have created if (there was) effective regulation. We have done amazing. Unbelievable. Despite all the roadblocks," he said.

The two airlines briefly buried the hatchet in 2011, when Fernandes agreed to a strategic tie-up aimed at helping to revive struggling MAS.

The deal was called off just months later, with Fernandes faulting "massive" MAS union resistance to reform and hinting at deep problems in the rival airline.

AirAsia is currently at odds with government-controlled airport operator Malaysian Airport Holdings Berhad (MAHB) over a two-year delay and cost overruns in the construction of a new budget terminal outside the capital Kuala Lumpur.

AirAsia is set to be the main presence at the facility. Its current opening date is May 2 but recent media reports have suggested it may yet be pushed back again.

Fernandes said MAHB "spends double what it could".

AirAsia, which has some of the lowest unit costs in the world, has raked in business awards and accolades over the years, while expanding aggressively.

AirAsia reported its net profit fell by $11 million in the third quarter of 2013, mostly on foreign-exchange movements. It will report full-year results at the end of February.

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Bomb scare grounds Indian airliner in Malaysia

An Indian airliner made an emergency landing in Malaysia on Thursday over a bomb scare, but fear turned to puzzlement once authorities discovered the contents of a suspicious package: three gold bars.

The pilot of the IndiGo budget airline flight from Singapore to Chennai in India diverted to Malaysia early Thursday after a crew member found the package in the toilet.

A Malaysian fire and rescue team that inspected the package at Kuala Lumpur International Airport (KLIA) found it contained three bars weighing less than 1 kilogramme (2.2 pounds) combined.

They were believed to be gold but authorities did not confirm that.

After evacuating the more than 100 passengers, a search found nothing dangerous.

"It was not chemicals. It was bars of gold-coloured metal wrapped up in cloth," said Sani Harul, a fire official.

The airliner later resumed its flight to India. The case is being investigated.

"We questioned the crew, but not passengers, as the yellow-coloured items were found in the toilet, not in anyone's possession," police official Zaldino Zaludin said.

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