AirAsia is buying a major stake in Indonesia’s Batavia Air, a move that will make the low-cost carrier the third-largest airline group in Indonesia and a serious competitor for Garuda Indonesia and Lion Air.

AirAsia Investment, a division of the Malaysian parent company, says it is buying 49% of Batavia Air in a deal that passes the remaining 51% to Indonesian company PT Fersindo Nusaperkasa to meet Indonesia’s foreign ownership laws. Fersindo also owns 51% of Indonesia AirAsia.

AirAsia Investment says the deal is subject to regulatory approval, but it expects to complete the acquisition in next year’s second quarter. The two investors will pay $80 million in cash for Batavia Air, including $1 million for the airline’s flying school. “The acquisition of 100% interest in Batavia. . .will be carried out in two stages—through acquisition of a majority 76.95% stake and subsequently followed by the remaining 23.05% held by its existing shareholders,” says AirAsia.

Indonesia AirAsia, which serves mostly international routes from Indonesia, says Batavia Air, the country’s fourth-largest carrier, will give it an extensive domestic network.

“The Batavia Air acquisition provides greater domestic connectivity and an extensive feeder network into Indonesia AirAsia’s existing hubs in Jakarta, Bandung, Denpasar, Medan and Surabaya,” says AirAsia.

“The addition of Batavia Air will also provide AirAsia immediate access to an enlarged fleet of aircraft, experienced pilots and flight crew and increasingly competitive slots at major Indonesian airports at a time when Indonesia’s travel sector is experiencing double-digit growth on the back of rapidly growing consumer demand for air travel,” the carrier adds.

Expanded Reach

Some of Indonesia’s busier airports have stopped issuing new slots at peak times because of capacity constraints, making existing slots increasingly important.