Three of the world's best known budget airlines, including Richard Branson's Virgin, will form a Malaysia-based alliance to fly long-distance routes for cut-rate fares, a news report said.

Branson is in discussions with AirAsia's Tony Fernandes and EasyJet's Stelios Haji-Ioannou, a Greek-British tycoon, to form what will be the world's first low-cost global network, The Star newspaper reported.

It quoted unidentified industry sources as saying that the new joint venture will first fly between Kuala Lumpur and Manchester in Britain and Amritsar in India.

Later plans are for flights to Hangzhou near Shanghai, China and Tianjin near Beijing. AirAsia spokespeople were not immediately available for comment because of a public holiday in Malaysia.

The Star, however, quoted Fernandes as saying that AirAsia, Asia's most profitable and largest no-frills carrier, is currently focused on short-haul services "where we have much work to do".

Asked specifically if a long-haul model is being contemplated, he told The Star: "Let's wait and see."

The newspaper quoted a source familiar with the discussions as saying that fares on the long-haul network will be as low as 100 ringgit for destinations in China. Fares to Britain will be between 300 and 2,500 ringgit, about half the price of a ticket on a regular airline.

The Star quoted industry sources as saying that the alliance - if it decides to fly to London as well - could also use the Luton airport as a hub because Virgin already operates a rail link from there to central London.

It said that the alliance will give Virgin and EasyJet access to Kuala Lumpur's low-cost airport terminal, the gateway to a dream Asian hub for their Europe to Australia routes.

AirAsia, which started in 2001 with two planes, now has a fleet of 50 aircraft and flies to destinations in Southeast Asia and China. Virgin Atlantic's network covers the United States, Hong Kong, south Africa, the Caribbean and Australia.

EasyJet, which started in 1995, was one of the first low-cost carriers in the world to sell tickets on the Internet. It flies 224 routes between 67 key European airports including Britain.

It's owner Haji-Ioannou also owns budget cruise ships, hotels and car rental firms.