Indonesia’s largest privately owned airline, Lion Air, will establish an affiliate carrier in Malaysia in partnership with local company National Aerospace & Defence Industries (NADI).

The Indonesian carrier’s president director, Rusdi Kirana, says a joint-venture framework agreement has been signed with NADI to establish a new Kuala Lumpur-based airline, which will be branded Malindo Airways.

Lion Air will own 49% of the new carrier and NADI 51%, in line with Malaysia’s foreign ownership laws, Rusdi says.

The new venture, as previously reported by Aviation Week Sept. 11, will apply for a Malaysian air operator certificate (AOC) and is expected to start flying within six to nine months, according to Rusdi.

Malindo, which will offer domestic and international air service, will be based at Kuala Lumpur International Airport’s (KLIA’s) new low-cost carrier terminal, KLIA Two, that is due to open in May, says Rusdi.

The airline will be positioned as a “value carrier,” rather than a pure low-cost airline, Rusdi adds. He says the new airline will, for example, permit some free check-in baggage and the aircraft will have inflight entertainment. It also will have on-board Wi-Fi, likely on a pay-per-use basis.

Rusdi says that the new airline will help reinforce KLIA’s position as an international hub and that Lion Air plans to channel some of its international traffic through KLIA.

The business plan calls for Malindo to have a fleet of 50-60 aircraft within 10 years, says Rusdi, adding that the initial fleet will consist of Boeing 737-800s and 737-900ERs.

Lion Air has 136 737 NGs on order and in December signed a contract that contributed 29 737-900ERs to that total and added 201 737 MAX aircraft to the carrier’s order book.

The new accord with NADI goes beyond simply establishing a new operator in Malaysia. It also addresses maintenance, repair and overhaul (MRO); supply chain management; and staff training.

Rusdi says NADI and Lion Air will establish training centers in Malaysia to develop a source of maintenance technicians, cabin crew and pilots. Lion Air also has an agreement with NADI, under which NADI's Malaysia-based MRO company, Airod, will perform heavy maintenance checks on some of Lion Air’s 737s.

The two companies will work together on supply chain management of aircraft components and parts, Rusdi says.

Lion Air is working to establish its own ATR and Boeing 737 airframe heavy maintenance facility on Indonesia’s Batam Island. A Lion Air spokesman says there is no plan to involve Airod in this facility.

Malindo Airways will be Lion Air’s first overseas affiliate carrier. The new airline still needs to secure a Malaysian AOC for scheduled commercial operations, which is subject to approval by the cabinet.

Rusdi, however, does appear to have the backing of the country’s prime minister, Najib Razak, who on Sept. 11 voiced his support for the venture.

Malaysia's airline industry is dominated by national carrier Malaysia Airlines and regional low-cost powerhouse AirAsia.