Air New Zealand says it hopes to lure more Australians onto its transtasman flights by code-sharing with fellow airline Virgin Blue.
The two airlines are seeking regulatory approval to collaborate on routes, products, code-sharing and frequent-flyer benefits.
They say an alliance would mean more and cheaper flights between New Zealand and Australia.
Air New Zealand's chief executive, Rob Fyfe, says the airline is having trouble filling seats and making money on transtasman flights and, while this is good for passengers, it is ultimately unsustainable.
He says Air New Zealand has no sales or distribution network in Australia, and an alliance with Virgin Blue would plug this gap.
Virgin Blue chief executive Brett Godfrey says the alliance will deliver cheaper fares to passengers.
Review likely to take six months
If the deal is approved, the airlines would be able to sell seats on each other's flights across the Tasman.
Air New Zealand could sell seats on connecting regional flights operated by Virgin Blue in Australia, and vice versa.
The airlines say the deal will stimulate a new wave of competition, but it's not a signal that they want to take a shareholding in each other.
The Australian Competition and Consumer Commission and the Ministry of Transport in New Zealand are expected to take about six months to review the application.
