KUALA LUMPUR - MALAYSIA Airlines said on Tuesday it has begun talks with various carriers, including Australia's Qantas, to form tie-ups including joint ventures as carriers face a tough economic environment.

The airline's managing director and CEO Idris Jala had previously denied reports that Malaysian and Australian carriers were in merger talks.

Mr Jala made the latest comments after Deputy Prime Minister Najib Razak reportedly said the government was open to a tie-up involving Malaysia Airlines. The government owns more that 90 per cent of the national carrier.

Mr Jala said that while Malaysia Airlines would pursue strategic partnerships, the government would have the final say in the decision to go ahead with a tie-up.

'Any partnership that we pursue will require engagement with, and approval by, key stakeholders,' he said.

'Malaysia Airlines is very pleased with the continued strong support from the government. We will do everything possible to fulfill the interests of the airline in line with the aspirations of the nation.'

Mr Jala said that 'more details will be announced as and when we have finalised the terms of any of these partnerships. At this stage, we have no further comment.'

Malaysia Airlines has undergone a sweeping turnaround programme, including staff layoffs and route closures, which ended a series of disastrous losses and produced a record profit in 2007.

Last month however, the carrier said net profit for the third quarter shrank 90 per cent to RM38 million ($15.7 million), from RM364 million in the same period last year due to higher fuel costs.

The International Air Transport Association last week said the aviation industry is expected to post a loss of US$2.5 billion ($3.69 billion) in 2009 due to the economic crisis.

'The outlook is bleak,' said Giovanni Bisignani, the association's director general and chief executive. -- AFP