The world's lowest-cost short-haul airline, Malaysia's AirAsia, is buying 100 more A320s as its founders move to set up a long-haul affiliate that they say will deliver the lowest seat-kilometer costs in the world.

AirAsia has also taken options on another 30 aircraft in its A320 deal, which will feed the existing short-haul business as the new no-frills long-haul operation, AirAsia X, introduces wide-body twinjets.

The narrow-body order doubles AirAsia's previous purchases of 100 A320s, deliveries of which have barely begun, and was signed Dec. 28, says an official source involved in the negotiations. So it adds to Airbus's latest annual total and puts the European manufacturer clearly past 600 narrow-body orders for 2006.

AirAsia X aims to start services in July under the air operator's certificate of a small Malaysian domestic carrier and with leased A330-300s, but it will soon place an order for permanent equipment.

"We're in final negotiations for 20 aircraft, either A330-300s or 777-300ERs," AirAsia CEO Tony Fernandes tells Aviation Week & Space Technology.

The GE-engined Boeing may be the favorite, since it offers enough range for nonstop flights from Kuala Lumpur to London, one of the first destinations. The other initial market will be China, says Fernandes.

GE and its partner in CFM International, Snecma, are also likely to gain from the A320 order, since AirAsia is already an established CFM56 user.

AirAsia has so far received only 15 of the previous batch of 100 A320s. The source involved in the deal says deliveries of the next 100 will run until 2012. At catalog prices, the latest order is worth more than $6 billion, not counting options.

Fernandes says the opportunity to establish AirAsia X has arisen partly because "Kuala Lumpur lacks a really good international network."

Using a familiar budget-airline argument, Fernandes says his new business will generate fresh traffic, not take it from existing companies. But it is hard to see AirAsia X as anything but frightening news for incumbent Malaysian Airlines, a high-cost company that has struggled to compete even against full-service rivals such as Singapore Airlines, let alone cut-price budget operators.