The budget carrier said in a statement Wednesday it has ended its agreement with Gumin Company Ltd and Hai Au Aviation to set up an airline.

But it "nonetheless remains interested in operating a low-cost airline in Vietnam due to its favorable geographical location, expanding aviation market and overall growth potential."

In a tweet on Thursday, AirAsia Group Chief Executive Tony Fernandes said Vietnam remains "very much in the plan."

"I am still optimistic of AirAsia being in Vietnam by end of the year. Watch this space. Picking the right one." The airline had planned to start flying by August this year.

The entry of Bamboo Airways in January, the country’s fifth airline, has intensified competition in the booming market where state-owned Vietnam Airlines, its low-cost arm Jetstar Pacific and budget carrier Vietjet are all seeking an increased share of the pie.