KUALA LUMPUR, MALAYSIA - Malaysia's government may allow more airlines to fly from Singapore to cities other than the capital Kuala Lumpur starting next year, benefiting discount carriers including AirAsia Bhd and FlyFirefly Sdn.

The two governments are negotiating a bilateral agreement that may take effect next year, Transport Minister Ong Tee Kiat said in an interview earlier this week.

The new proposal follows Malaysia and Singapore giving budget carriers such as Tiger Airways and Jetstar Asia Airways access between their capitals in February, adding competition for Malaysian Airline System and Singapore Airlines.

By the year's end, there will be unlimited access for low-fare carriers on the route, Mr Ong said.

The government plan 'will create new markets for airlines like AirAsia and Firefly and further boost the tourism industry,' said Ang Kok Heng, who oversees the equivalent of US$130 million as chief investment officer at Phillip Capital Management in Kuala Lumpur.

The move to open up more Malaysian cities to Singapore may benefit Firefly, the budget carrier unit of Malaysian Airline. The low-fare airline now flies to Subang, outside Kuala Lumpur, from the state of Penang, where the company is based.

AirAsia closed one sen lower at RM1.25 yesterday in Kuala Lumpur. Malaysian Airline System shares gained 14 sen to close at RM4.14, the highest since the close on Feb 29.

More cities will be opened for budget airlines by 2012 under a wider arrangement with Asean nations, said Mr Ong.

The full liberalisation of air routes in South-east Asia 'will come gradually', he added.

By December 2010, the capital cities of the 10-member Asean countries can be used as stopovers, allowing their airlines to sell tickets and take passengers from those cities to fly on 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.