Flag carrier Malaysia Airlines and budget carrier AirAsia have been given less than a month to work out a plan of cooperation after they agreed to lay aside their differences to end months of bitter rivalry, reports said today.

The decision was made yesterday at a meeting chaired by Transport Minister Chan Kong Choy with the heads of both airlines, the New Straits Times said.

"MAS and AirAsia have expressed willingness to foster a close working relationship in the interest of the nation and the industry," Chan said after talks with MAS managing director Ahmad Fuaad Dahalan and AirAsia chief executive Tony Fernandes.

"We are giving them less than a month (to work out a plan)."

The two airlines will explore cooperation in areas such as maintenance, ground handling, engineering, spare parts procurement and marketing, he said.

Fernandes earlier this week said if the two airlines formally agreed to start cooperating, they would create history by becoming the first no-frills and full-service carriers to work together.

"AirAsia can take on some MAS capacities that are loss-making; in turn MAS can focus, redeploy and manage its stronghold in the more profitable areas such as in India, China, Thailand, Indonesia and the rest of the world," he said.

MAS initially planned to launch a budget carrier with other regional airlines but later dropped the idea.

Tiff over hub

However, a main difference between the two rivals is the location of a proposed low-cost carrier hub, with AirAsia favouring the old unused terminal in Subang near Kuala Lumpur while MAS favours the Kuala Lumpur International Airport.

AirAsia has expanded at a furious pace after having humble beginnings with just two Boeing 737-300 jets in 2001 plying Malaysia's domestic routes. It now flies to 30 destinations in Malaysia and the region, including Singapore, Thailand, Indonesia and Macau, and hopes to fly to China by year-end.

The carrier recently gained full regulatory approval for its initial public offering and will issue 700.51 million shares in what is expected to be Malaysia's largest listing this year.

AirAsia executive director Kamarudin Meranum also told the New Straits Times that the airline was waiting for Jakarta authorities to issue a license to enable it to team up with a local party there to set up a no-frills airline.

The Indonesian set-up will be similar to that of Thai AirAsia, where the majority shareholder is Thai media and telecommunications group Shin Corp., he added.