"At the present time we unfortunately have no further information regarding the status of the passengers and crew members on board, but we will keep all parties informed as more information becomes available," it said.
The aircraft was an Airbus A320-200 with the registration number PK-AXC.
The flight took off from Juanda International Airport in Surabaya at 0535hours, an updated statement from AirAsia said.
There were two pilots, four flight attendants and one engineer on board.
The captain in command had a total of 6100 flying hours and the first officer a total of 2275 flying hours.
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Nationalities of passengers include 156 people from Indonesia, three people from South Korea, one person each from France, Malaysia and Singapore.
The statement said the aircraft was on the correct flight plan route and was requesting deviation due to weather conditions before communication with the aircraft was lost.
The Australian Embassy in Jakarta and the Australian High Commission in Singapore are making urgent inquiries with local authorities and the airline to determine whether any Australians may have been on Air Asia flight QZ850 from Surabaya to Singapore, a spokesperson for Department of Foreign Affairs and Trade (DFAT) said.
Those concerned about the welfare of their Australian family and friends who were known to be travelling on this flight should contact the Department of Foreign Affairs and Trade’s 24 hour Consular Emergency Centre on 1 300 555 135 or +61 2 6261 3305 (if calling from overseas).
The incident comes at the end of a disastrous year for Malaysia's airlines.
National flag carrier Malaysia Airlines lost two aircraft this year.
Its flight MH370 went missing on March 8th on a trip from Kuala Lumpur to Beijing with 239 passengers and crew on board.
On July 17, Flight MH17 was shot down over Ukraine, killing all 298 people on board.
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"Pilot training in AirAsia is continuous and very thorough. Rest assured that your captain is well prepared to ensure your plane will never get lost," the article read.
AirAsia insisted the article was written and published well before the disappearance of flight MH370.
"It truly saddens me that this article was released at such an inopportune moment," AirAsia Executive Chairman Kamarudin Meranun said the time.
AirAsia has established an Emergency Call Centre that is available for family or friends of those who may have been on board the aircraft. The number is: +622129850801.
The airline will release further information as it becomes available.
AirAsia was formed in 2001 and encompasses Thai AirAsia, AirAsia Malaysia and Indonesia AirAsia.
News break - December 28
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