MALAYSIA'S government may allow more airlines to fly from Singapore to cities other than the capital Kuala Lumpur starting next year as restrictions ease between the neighbours, Bloomberg News reported on Friday.

The two governments are negotiating a bilateral agreement that may take effect next year, Transport Minister Ong Tee Kiat said in an interview with Bloomberg on Wednesday.

Malaysia and Singapore gave budget carriers AirAsia, Tiger Airways and Jetstar Asia limited access between Kuala Lumpur and Singapore in February, adding competition for state- controlled carriers Malaysian Airline System and Singapore Air Ltd By the end of the year, there will be unlimited access for the low-fare carriers, Mr Ong said.

More cities will be opened for competition by 2012 under a wider arrangement with the Association of Southeast Asian Nations, Mr Ong told Bloomberg.

The full liberalisation of air routes in South-east Asia 'will come gradually'. By December 2010, the capital cities of the 10-member South-east Asian countries can be used as a stopover, allowing their airlines to sell tickets and take passengers from those cities to go to a different destination, he said.

A fully liberalised Asian air-travel market could generate as many as 1,600 low-cost routes by 2015, according to Airbus SAS. Asia's budget airlines will have a combined fleet of 1,300 single-aisle aircraft by 2025, compared with 236 now, according to Airbus, the world's largest maker of commercial aircraft.

Visitors from Singapore accounted for at least 54 per cent of monthly arrivals in Malaysia, according to data from the Immigration Department of Malaysia in 2006.