Instead, Anthony Loke Siew Fook, said the federal government was keen on upgrading PIA which was operating over its designed passenger capacity.

Loke said there is no final decision on the LCCT but his ministry is studying proposals on the need for a separate terminal for budget airlines.

Last month, budget carrier AirAsia reportedly said it was keen to pursue an old idea of building a LCCT.

The Star reported that AirAsia was once given the nod by former chief minister Koh Tsu Koon to build a LCCT on 36ha of land at the coastal end of PIA, but it was met with resistance from federal authorities due to “political reasons”.

The report claimed the resistance was mainly due to AirAsia’s plans to run it privately as opposed to handing over its management to government-linked company Malaysia Airports Holdings Bhd (MAHB).

On Aug 6, Air Putih assemblyman Lim Guan Eng, who is the finance minister, told the state assembly that the LCCT would be built at the same time as the expansion of PIA.

Lim said the LCCT would cost the government nothing since a private company would pay for it under a public-private partnership.

He also said talks were ongoing between AirAsia and MAHB on the proposed project.

Today, Loke told a press conference here that the Penang airport’s expansion is a top priority.

“As far as I am concerned, there is no final decision on the LCCT.

“There is also no approval to AirAsia to work on the LCCT. All these are rumours in the media. The media is free to speculate.

“Whether a separate terminal is to be built or the existing terminal upgraded, no decision has been made. We will decide on this later,” he said.

The PIA has exceeded its maximum designed capacity of 6.5 million passengers per year, and it currently handles about 7.1 million passengers.