(AFP) - Loss-making Malaysia Airlines is still keen on a strategic foreign alliance but must first settle its internal problems, Prime Minister Mahathir Mohamad said today.

Mahathir said the government was still studying the possibility of de-linking the national carrier's domestic and international operations.

"We have to improve Malaysia Airlines. You know there is this problem of domestic and foreign (routes). Domestic basically lose money and foreign airlines are not keen to subsidise local flights," he told a press conference after opening a regional tourism conference.

The premier said the flag carrier was "talking to a lot of airlines at the moment" about a possible alliance.

"I'm quite sure we'll find a strategic alliance. We'll choose the best, there is no hurry," he added.

Controversial buyback

The government has just renationalised the carrier following completion of the controversial buyback of a 29 percent stake from Naluri Bhd for RM1.79 billion, at more than twice the shares' current value.

Transport Minister Ling Liong Sik last month said the government may subsidise Malaysia Airlines' domestic routes to enable the carrier to return to profitability in the next two years.

The carrier's debts now amounted to RM9.52 billion, the government said.

The airline's new management has announced plans to reschedule debts, trim staff and other costs, rationalise routes and possibly separate domestic and international operations.

Showpiece airport

Mahathir said Malaysia's showpiece international airport was not losing out to Bangkok or Singapore airports even through four airlines have stopped flying into the country.

"Four airlines stopped flying into KL but the number of passengers coming through have increased. They have their own problems and we can appreciate that," he said.

"We are not losing out and we will go ahead and promote the KLIA (Kuala Lumpur International Airport)."

The premier added that the government was talking to global airlines to see how it can attract them to operate here.

Japan's All Nippon Airways, British Airways, Qantas and Lufthansa have stopped services to the nine-billion-ringgit KLIA which opened June 1998, dealing a blow to efforts to promote it as a regional hub.