Budget carrier AirAsia said the Finance Ministry had approved the company's application for additional tax incentives, a move which dealers said could further boost its earnings.

Shares in AirAsia were buoyed early today by the news, which came a day after the low-cost airline said it had completely hedged its fuel requirements for the year to June 2006 as part of efforts to combat soaring oil prices.

"The investment allowance incentive will contribute positively to AirAsia's future consolidated earnings," AirAsia said in a statement late yesterday.

The airline said that new tax breaks on capital expenditure will in effect mean it will get a 160 percent allowance on such spending, with any unused portion free to be carried forward indefinitely.

AirAsia chief executive Tony Fernandes said the allowance means "our future budgeted tax payment requirements are minimal. The savings rendered from this incentive will enable us to continually offer low fares."

The company applied for the change earlier this year and it was widely expected that it would get approval.

Tax break up to RM128 mil

AirAsia shares were up 11 sen or 7.05 percent to RM1.67 in mid-morning trade.

An analyst at a local research firm said "this is definitely good news for AirAsia".

He said the tax break could be worth RM56.2 million to the airline in the year to June 2006, rising to RM90.1 million and RM128 million over the following two years.

AirAsia, Southeast Asia's pioneering low-cost carrier, announced in August that its net profit for the year to June was 30.2 percent lower than forecast at RM111.63 million due to higher fuel prices and an aircraft shortage.

In July it announced it would introduce a fuel surcharge on its flights for the first time amid skyrocketing fuel prices.