MALAYSIA'S Cabinet has given approval in principle to allow budget airline AirAsia to start flights to Singapore, a source familiar with the process told Reuters yesterday.

The move could take effect late this year or by the end of the first quarter of next year and would liberalise lucrative routes dominated for decades by Malaysia Airlines (MAS) and Singapore Airlines (SIA).

The two governments will have to work out the formalities, including allowing an additional Singapore carrier to fly the routes, according to a diplomatic source, who said that a bilateral meeting on the issue is expected in the coming weeks.

AirAsia is expected to offer return flight fares, including taxes and surcharges, of about RM300 to RM400 (S$130 to S$173), less than half the price now being charged by MAS and SIA, the source said.

In additional to Kuala Lumpur, the twice-daily flights would link Singapore to the cities of Penang, Kota Kinabalu and Kuching, the source said.

MAS has strongly objected to the opening up of the Kuala Lumpur-Singapore route, arguing that it could negatively affect restructuring under way at the airline.

The source said the decision to liberalise the routes followed a paper presented to the Cabinet by the Malaysian tourism minister, which showed that the move could dramatically boost tourism.

AirAsia was set up in 2001 by Mr Tony Fernandes, who once worked for Sir Richard Branson, founder of Virgin Atlantic Airways.

Virgin Group recently announced plans to take a stake in AirAsiaX, an intercontinental budget airline which Mr Fer-
nandes aims to have flying late next year.

REUTERS