Jetstar, the budget airline owned by Qantas, says it offer substantially cheaper fares on domestic routes after reaching an agreement with Air Asia.
The alliance will save both airlines between $200 million and $300 million through the sharing of services such as ground staff and aircraft maintenance.
They are also considering buying aircraft together.
Jetstar chief executive Bruce Buchanan says the cost savings will allow the airlines to offer cheaper fares to passengers, including those travelling within New Zealand.
