It is setting up a new carrier - called Incheon Tiger Airways - and will have an initial fleet of five A320 aircraft.

Tiger Airways will own 49 per cent of the carrier and the South Korean city of Incheon will own the rest.

Yesterday, Tiger Airways' CEO Tony Davis revealed that the carrier is expected to start flying in 12 months' time.

With the Asian Games scheduled for the city in 2014, demand is expected to soar - 80 million passengers are expected to go through Incheon's airport, up from the current 30 million a year now.

The joint venture will challenge Korean Air Lines and Asiana Arlines for passengers in Asia's fourth largest economy: it will have domestic and international routes - with flights from South Korea to China, Japan and the Russian Far East.

Mr Davis noted that it was a 'huge opportunity' because they were poised to reach a very, very large population' within two hours flying time of Incheon - which is about 28 km north-west of the nation's capital Seoul.

Formal approvals from both governments are still pending to actually start the carrier, but industry observers say these approvals are almost a formality to a done deal.

Tiger Airways is owned by four shareholders including Singapore Airlines, which has a 49 per cent stake. It already has a base at Clark International Airport in the Philippines and will launch a domestic carrier in Australia this month.

Mr Davis hinted at more expansion plans and is targeting 'a new base every 12 to 18 months'.

At an aviation conference in Singapore last week, Mr Peter Harbison, executive chairman of the Sydney-based airline consultancy, the Centre for Asia Pacific Aviation, said low-cost carriers are here to stay and will continue to grow.

Unlike many traditional carriers that are saddled with legacy practices and costs, low-cost players are more nimble and can move faster in expanding their businesses not just within their home bases, but overseas as well.

Tiger Airways also reiterated its interest to start flights to Kuala Lumpur and other destinations in Malaysia.

Malaysia recently decided to allow budget carriers to operate on the lucrative 45-minute Singapore-KL air route, now dominated by Singapore Airlines and Malaysia Airlines with return air fares averaging $400.

Mr Davis promised that Tiger would offer very competitive, low fares, but stopped short of naming a price.

Competitor AirAsia earlier stated it planned to charge RM150 ($65) for Singapore-KL flights.