This article first appeared in The Edge Financial Daily, on December 18, 2015.

KUALA LUMPUR: Malaysia will see the entry of a new low-cost passenger airline, Rayani Air Sdn Bhd, which will offer flights to and from klia2 in Sepang, Langkawi International Airport and Kota Baru’s Sultan Ismail Petra Airport.

The new airline is due to receive its air service licence (ASL) and air operator’s certificate (AOC) from the Department of Civil Aviation today. The ASL is a significant step towards obtaining a full AOC, which will allow the commencement of operations domestically in, and internationally from Malaysia.

It is understood that Rayani Air will position itself as a low-cost carrier, competing head-on with well established low-cost airlines such as AirAsia Bhd, as well as hybrid airline, Malindo Air.

According to its website, Rayani Air has been accepting bookings since Tuesday for travels between Dec 20, 2015 and May 31, 2016.

Rayani Air is launching into a difficult market, which has seen Malaysian Airline System Bhd (MAS) being taken private by its major shareholder, Khazanah Nasional Bhd last December. Earlier this month, Malaysia Airlines signed a deal to expand the partnership with Emirates Airline, which will see it stop flying to Amsterdam and Paris with its own planes from the end of January, as part of a turnaround plan.

AirAsia and its long-haul budget associate AirAsia X Bhd (AAX) are also struggling to make a profit as borrowing costs swelled due to a weak ringgit amid intense competition. Last month, Singapore Airlines also launched a S$453 million (RM1.39 billion) takeover bid for Tiger Airways with an intention of delisting and privatising the loss-making budget airline.

When contacted, AirAsia group chief executive officer Tan Sri Tony Fernandes said the group welcomes new competition into the industry, as it would motivate the group to be a better airline.

“We got to be better. Competition is good,” he told The Edge Financial Daily, adding that the AirAsia Group remains intact until today despite past concerns that it would lose market share when Malindo Air commenced operations back in March 2013.

MIDF Research aviation analyst Tay Yow Ken doesn't see the entry of Rayani Air affecting existing Malaysian carriers as it only operates a fleet of two Boeing 737s.

“We will have to see how it (Rayani Air) turns out first, and what its expansion plans are. But based on its current fleet size, which is still very small, it is unlikely to pose a threat to AirAsia's market share for now,” he told The Edge Financial Daily.

An aviation analyst, who declined to be named, said Rayani Air’s entry is unlikely to be disruptive to the industry. “We cannot rule out the possibility of it (Rayani Air) becoming another Malindo Air. Therefore, we have to see what kind of expansion plan it has and how the airline will grow moving forward,” she added.

As at Sept 30, 2015, AirAsia has a fleet of 81 aircraft, while Malindo Air operates 27 aircraft.

A search on the Companies Commission of Malaysia's website showed that Rayani Air has two shareholders, namely Umad Suhaili (who owns a 51% stake) and Datuk Karthiyani Govindan (holds the remaining 49% stake).

Karthiyani is the wife of Rayani Air’s current managing director, Ravi Alagendrran Sinniah.

The Edge weekly had on Nov 13, 2014, quoting Ravi, reported that Rayani Air intended to acquire two 737-400s from Penerbangan Malaysia Bhd, a wholly owned subsidiary of Khazanah that is now dormant.

Ravi was reported as saying that he planned to raise RM40 million for the purchase of more aircraft through bank borrowings.

AirAsia (fundamental: 0.2; valuation: 1.2) shares rose two sen or 1.55% to close at RM1.31 yesterday, valuing it at RM3.59 billion; while AAX's (fundamental: 0.2; valuation: 0.3) share price closed unchanged at 18.5 sen, with a market capitalisation of RM767.4 million.

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