Malaysia's low-cost carrier AirAsia may operate more frequent flights to local destinations now dominated by loss making national carrier Malaysia Airlines, an industry source said.

Under the rationalisation programme backed by the government, AirAsia may mount additional flights to popular destinations such as Kota Kinabalu and Kuching in the eastern Sabah state and Sarawak on Borneo island.

Other destinations include to northern Penang state and the island resort of Langkawi, the source, familiar with the plan, told AFP .

The source said that a meeting between the top chiefs of AirAsia and Malaysia Airlines and attended by a top official from the transport ministry was held two weeks ago.

The Star newspaper said yesterday that the two carriers had agreed in principle that cash rich AirAsia could have more frequent flights to specific local destinations.

Malaysia Airlines chairman Munir Majid (left) confirmed the meeting, it said.

Munir said the cabinet which holds its weekly meeting Wednesday was expected to discuss the plan.

Cabinet to decide

The airline recently announced one of its worst ever quarterly losses at RM280.66 million (US$74 million) for the three months to June, after a profit of RM26.58 million a year earlier.

Malaysia Airlines has announced an ambitious five-year plan to boost profits by up to RM1.0 billion, which included a management shake-up.

AirAsia's chief executive officer Tony Fernandes (left) told AFP that: "It is in the hands of the cabinet." However, he declined to elaborate on the plan.

If the move went ahead, World Discovery Travel business development manager Joseph Xavier said cheaper flights (by AirAsia) would help boost domestic tourism and fill hotel rooms during the off peak season.

"It will also help the government as it will not have to subsidise Malaysia Airlines for its local flights," he was quoted as saying by the Star.

Transport Minister Chan Kong Choy in June said the government wanted the two carriers to cooperate.

AirAsia was launched in December 2001 with just two aircraft and has since become a significant regional player, with its business model increasingly imitated by national carriers and a host of new low-cost entrants.