Malaysia said Thursday that budget carrier AirAsia has won its long battle to fly the lucrative Singapore-Kuala Lumpur route, breaking a 35-year monopoly held by the two national airlines.

"We have made a decision, the cabinet has approved," Prime Minister Abdullah Ahmad Badawi told reporters when asked if AirAsia had been given the green light to fly between the neighbouring capitals.

Newspaper reports said the Malaysian cabinet had given approval Wednesday for Malaysia-based AirAsia and Singapore's Tiger Airways to operate the leg, setting the stage for a price war.

Transport Minister Chan Kong Choy said Malaysia would push for AirAsia to be allowed to operate two flights a day.

"We want AirAsia to fly two flights daily from Kuala Lumpur to Singapore and a Singapore-appointed budget carrier will also have a similar number of flights into Kuala Lumpur," he told a press conference.

"I will attend the ASEAN Transport ministers meeting in Singapore next week and I intend to bring this proposal to my Singapore counterpart," he said, referring to the Association of Southeast Asian Nations.

Chan did not say when the services will begin, but the New Straits Times said it was expected to be in December or January.

It said that AirAsia would also operate two daily flights each from the island tourist destination of Penang and from Kota Kinabalu and Kuching on Borneo island.

Tiger Airways said Thursday it wants to fly the route as soon as possible, and had approached the Civil Aviation Authority of Singapore to advise them "of its desire to operate this route at the earliest opportunity."

The airline is 49 percent owned by national carrier Singapore Airlines.

AirAsia shares rallied on the news, closing up 11 sens or 5.5 percent at 2.10 ringgit (0.63 dollars).

The pioneering budget carrier had mounted an intense campaign to break the monopoly held by Singapore Airlines and Malaysia Airlines.

Departing from Singapore, a round-trip ticket on the route, which takes less than an hour, currently costs around 450 Singapore dollars (298 US) including taxes. AirAsia is proposing one-way tickets from 60 dollars.

AirAsia's founder Tony Fernandes said this week that with Singapore indicating it wants to open the sector to competition ahead of a January 2009 deadline, Malaysia Airlines remained the only roadblock.

The Malaysia carrier has opposed an early opening of the money-spinning KL-Singapore leg, saying it needs more time to carry out a turnaround plan aimed at restoring profitability.