National flag carrier Malaysia Airlines said it has "no knowledge" of a report that no-frills pioneer AirAsia has won the backing of the government to take over its domestic flights.

"We hereby confirm that Malaysia Airlines has no knowledge of the contents of the article which is unsubstaintiated," it said in a statement to the stock exchange late yesterday.

The Business Times newspaper reported last week, citing unnamed sources, that AirAsia might take over Malaysia Airlines' domestic services, causing much anxiety among the carrier's 8,000 employees.

Such a development would "result in at least 5,000 Malaysia Airlines workers losing their job," Alias Aziz, union president was quoted as saying.

Pahamin Rajab, AirAsia's chairman, told AFP that the budget carrier had not been approached to take over Malaysia Airlines' domestic services but would not balk at the opportunity if it came.

"We will not ask but we will not refuse. If the government feel it is better done by us, we will come in," he said.

Many possibilities

Pahamin said the concerns of the Malaysia Airlines union were unfounded.

"Surely, if we are asked to take over, there are so many possibilites. One is we may take over, lock, stock and barrel like any privatisation exercise. We will take over the planes and the people so they will not be out of jobs," he said.

AirAsia plans to invest RM228 million as it builds up its fleet to 30 aircraft by year's end from the current 14.

The two-year-old Malaysian company has become Southeast Asia's version of European budget carrier Ryanair. It has carried more than four million passengers since it was launched in December 2001. - AFP