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Virgin and easyJet eye Malaysia tie-up

A Virgin Atlantic aircraft lines up alongside other airlines at terminal two, Manchester Airport, Manchester, northern England June 22, 2006. FlyasianXpress, a domestic Malaysian carrier controlled by the major owners of low-cost carrier AirAsia Bhd, could enter into a tie-up with easyJet and the Virgin group, a source familiar with the plan said on Wednesday. REUTERS/Phil Noble

KUALA LUMPUR (Reuters) - FlyasianXpress (FAX), a domestic Malaysian carrier controlled by the major owners of low-cost carrier AirAsia AIRA.KL, could enter into a tie-up with easyJet EZJ.L and the Virgin group VA.UL, a source familiar with the plan said on Wednesday.

Malaysian newspapers have reported that AirAsia, EasyJet and the Virgin group were in talks to form a global no-frills alliance that would offer cheap flights within Asia as well between Europe and Australia via Kuala Lumpur.

Speculation over the tie-up drove shares of AirAsia up as much as 9.3 percent earlier on Wednesday. AirAsia has said it will make a major announcement on a new service on Friday.

The alliance, targeted for a July launch to take advantage of the summer holiday season, would also count cargo-carrying operations as a major source of revenue, said the source.

“It’s expected to be part and parcel of the business,” said the source, who did not want to be identified.

The alliance is expected to initially need two aircraft -- a toss up between Airbus' EAD.PA A330 or Boeing Co's BA.N 777 -- and will probably stay a one-make outfit, the source added.

“We’re aiming for a soft launch in July -- the height of summer,” the source said, declining to provide further details.

FAX has been subcontracted by AirAsia to fly domestic rural routes to the eastern Malaysian states of Sabah and Sarawak that were taken over from state carrier Malaysia Airlines MASM.KL.

Shareholders of FAX are AirAsia co-founders Tony Fernandes and Kamarudin Meranun, the company’s Web site shows.

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