The new terminal will be constructed near the main Kuala Lumpur International Airport and will handle up to 30 million passengers annually, according to Bashir Ahmad, Malaysia Airports Holdings Managing Director.
"We've found the location and will be announcing it at the right time” said Ahmad.
This is no doubt good news for budget carrier AirAsia who has been stressing that its expansion plans will be limited by the current size of Malaysia’s airports.
The carrier plans to grow its fleet to 184 by 2013, bringing in up to 30 million people in passenger traffic.
Currently the existing terminal does not have a sufficient amount of aircraft parking bays and can only handle up to 15 million people annually according to the International Herald Tribune.
Last month, the government rejected AirAsia’s proposal to build and operate a budget terminal costing 1.6 billion ringgit ($432 million).
The 2 billion ringgit now allocated by the government to build the low-cost terminal is part of its recently announced 60 billion ringgit ($16.2 billion) economic stimulus package.