AirAsia has confirmed it will drop plans to set up an airline in Singapore, citing high costs and weak market potential for the decision.

“We are concentrating on markets which have big domestic markets and big populations and markets that are more liberal and market orientated,” AirAsia chief executive Tony Fernandes explained earlier.

It had become clear to AirAsia that “we are in the right markets and capital should go into those countries to maximise return” added Fernandes in an email.

The Civil Aviation Authority of Singapore offered no comment on Fernandes’ statement about costs in the country.

Based in Sepang, Malaysia, AirAsia has expanded rapidly since Fernandes and partners bought the carrier in 2001.

The carrier is now the largest budget airline in the region by market share.

AirAsia maintains ventures in the Philippines, Japan, Thailand and Indonesia as it seeks to tap growing demand for aviation in the thriving region.

Singapore Airlines launched, Scoot, a potential low-cost rival to AirAsia in Singapore in November 2011.