AirAsia and Jetstar Cement Low-Cost Carrier Alliance

Malaysia’s AirAsia and Australia-based Jetstar on Wednesday confirmed they were forming an alliance to help the budget carriers reduce costs, including cooperation on passenger handling at airports across the region and possible joint purchases of aircraft.

On Dec. 18, the Jakarta Globe reported the two were in talks to form a joint venture, a sign that budget carriers were under pressure to cut costs.

Reacting then to the news, the country’s biggest low-cost carrier, PT Lion Air, said any alliance would make competition in Indonesia, one of the region’s largest markets, even more cutthroat.

Key to the AirAsia-Jetstar agreement signed on Wednesday in Sydney is a proposed joint specification for the next generation of narrow body aircraft, the airlines said.

The airlines, among the biggest low-cost carriers in Asia, will consider buying aircraft together so that the bigger orders lower the cost of each plane.

Jetstar, a unit of Australian flag carrier Qantas Airways, and AirAsia will share aircraft parts and cooperate on passenger handling at airports in Australia and Asia.