AirAsia and Malaysia Airlines’s (MAS) interests could soon be aligned via a cross-shareholding.

Reports in Malaysia, citing unnamed sources, say AirAsia shareholders Tony Fernandes and Kamarudin Meranun are working on such a deal with the Malaysian Government’s investment arm Khazanah Holdings, which owns about 70% of MAS.

The reports say the plan is for the two AirAsia shareholders to swap some of their shares with Khazanah for shares in MAS. Fernandes and Kamarudin together will end up with about 20% of MAS, add the reports.

Fernandes and Kamarudin have issued a statement saying they have no plan to be majority shareholders in MAS. But the statement stops short of ruling out becoming minority shareholders.

Kazanah has also issued a statement saying it will remain MAS’s majority shareholder. But it too stops short of ruling out that it may reduce its MAS stake.

If the reports are correct, Fernandes and Kamarudin are buying into MAS at an opportune time. MAS’s share price has fallen dramatically in recent months as higher fuel prices have pushed it into the red.

The tie-up between AirAsia and MAS gives Fernandes, if he wants it, a future exit strategy. Qantas Airways’ Jetstar has for years been trying to buy AirAsia but Fernandes - who is proud Malaysian - would probably be reluctant to sell out to foreigners. Selling out eventually to the Malaysian Government’s investment arm may be appealing, particularly if he wants to leave a positive legacy in Malaysia or enter Malaysian politics.

The tie-up between the two carriers also shores up AirAsia’s future and puts a stop to any future competition from MAS that could threaten its business. If the two become linked, through a cross-shareholding, it is likely MAS’s low-cost carrier Firefly will be told to stop flying jet aircraft and instead focus on its ATR turboprop operations that operate on different routes to AirAsia.

Firefly started competing against AirAsia head-on in January when it started operating Boeing 737s from west to east Malaysia, AirAsia’s core domestic business. MAS may be happy to comply because Firefly’s jet operation is reportedly unprofitable, whereas the turboprop business does make a profit.

AirAsia X, meanwhile, has been moving into some of MAS’s medium, long-haul international routes. MAS in the past was able to limit AirAsia X’s expansion because it already had a lot of the international traffic rights and it had an understanding with the government that it would be given first priority to future traffic rights. But the government announced earlier this year it would treat each airline equally and that AirAsia is free to compete on the same medium, long-haul international routes as MAS.

The two could work together in future on international route planning. MAS may withdraw from some marginal leisure routes that AirAsia may be able to operate more profitably. AirAsia may in return agree to leave some business traveller routes to MAS, such as Kuala Lumpur-Tokyo Haneda.