Struggling Malaysia Airlines will not be allowed to hike its fares for domestic services, a senior minister said today.

Transport Minister Chan Kong Choy said that the government felt it was not an appropriate time to endorse a 10 percent fare rise as requested by the parent company of state-owned carrier Penerbangan Malaysia Berhad.

"We do not agree for a hike at the moment. ... we are not in favour," he was quoted as saying by Bernama news agency. Chan did not elaborate.

The last time Malaysia Airlines enjoyed a fare hike was 13 years ago.

The setback comes just after the government announced a plan last Thursday to slash the airline's domestic flights in favour of low-cost carrier AirAsia.

After more than a year, the government said that profitable AirAsia would operate more frequent flights and routes to local destinations currently dominated by Malaysia Airlines.

Restucturing plan

Under the rationalisation programme backed by the government, AirAsia would operate all secondary domestic services while also operating on perhaps the five-10 busiest routes with Malaysia Airlines.

The government has ordered both AirAsia and Malaysia Airlines to identify and workout the division of routes by March 27.

Malaysia Airlines has previously announced an aggressive restructuring plan to achieve record profits by 2008 after posting massive losses for the last financial year.

It says that some 114 out of its 118 domestic routes were not profitable.

AirAsia was launched as a budget carrier in December 2001 with just two aircraft and is now Southeast Asia's biggest low-cost carrier.