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Qantas' Jetstar, AirAsia in Non-Equity JV to Cut Costs

Jetstar, the budget airline owned by Australia's Qantas Airways, and Malaysia's AirAsia will form a non-equity alliance to cut costs, a sign that even budget airlines were feeling the burden of the aviation industry downturn.

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Wednesday's joint announcement comes less than a month after Qantas flagged a possible tie-up between the region's two fastest growing no-frills airlines.

"The aviation market in Asia is a growth market, and has proven resilient over the past 12 months, despite the tough operating environment, with significant growth in passenger numbers forecast in the region," Qantas Airways Chief Executive Officer, Alan Joyce said.

Airlines worldwide have been grappling with falling demand, higher funding costs and volatile fuel prices.

AirAsia and Jetstar compete regionally with Tiger Airways, which is 49 percent-owned by Singapore Airlines and which has received a lukewarm response to a planned initial offering of shares.

The alliance between Jetstar and AirAsia will explore opportunities in areas including joint procurement of aircraft and pooling of inventories, the statement added.

AirAsia, the region's biggest low-cost carrier, and Jetstar have grown rapidly and now fly routes across Southeast Asia and Australia.

"With joint purchasing power it means that we can potentially work with airline manufacturers on the right configuration and design of an aircraft specifically for AirAsia and that best suits our operational needs for the future," Air Asia CEO Tony Fernandes said.

The Jetstar Group currently operates a total fleet of 60 aircraft comprising 48 A320 family aircraft, and has future orders and purchase rights for about 100 new aircraft.