KUALA LUMPUR (Reuters) - AirAsia , Asia's largest budget carrier, has scrapped a $80 million deal to buy Indonesia's Batavia Air because the move would have carried too many risks, AirAsia Group CEO Tony Fernandes said.

Malaysia-listed AirAsia had announced plans in July to acquire Batavia in a bid to expand in Southeast Asia's biggest economy. It would have been AirAsia's first major airline acquisition and would have ratcheted up competition in Indonesia among low-cost carriers such as Lion Air and flag carrier Garuda's Citilink unit.

"Our aggressive focus in Indonesia remains and we will push our Indonesian IPO plans while still maintaining close co-operation with Batavia Air," Fernandes said in a statement on Monday.

"The company's decision was based on a thorough evaluation by many parties into Batavia Air. In our minds, the timing was perhaps not appropriate as it would have induced too many risks and would ultimately be earnings dilutive to our shareholders."

Fernandes in the past has expressed caution towards acquisitions, calling them "value-destroying" in an interview with Reuters last year.

AirAsia will now collaborate with Batavia Air on other aspects of the aviation business, including a training joint venture to address an expected skilled pilot shortage in Indonesia, the statement said.

AirAsia shares were down 0.3 percent in early trade.

(Reporting by Niluksi Koswanage; Editing by Chris Gallagher)