Malaysia said Thursday that budget carrier AirAsia has won its long battle to fly the lucrative Singapore-Kuala Lumpur route, breaking a 35-year stranglehold held by the two national airlines.

"We have made a decision, the cabinet has approved," Prime Minister Abdullah Ahmad Badawi told reporters when asked if AirAsia had been given the green light to fly between the neighbouring capitals.

Newspaper reports said the Malaysian cabinet had Wednesday given the nod for Malaysia-based AirAsia and Singapore's Tiger Airways to operate the overpriced leg, setting the stage for a price war.

Departing from Singapore, a round-trip ticket on the route, which takes less than an hour, currently costs around 450 Singapore dollars (307 US) including taxes. AirAsia has proposed one-way tickets from 60 dollars.

Transport Minister Chan Kong Choy said Malaysia would push for AirAsia to be allowed to operate two flights a day.

"We want AirAsia to fly two flights daily from Kuala Lumpur to Singapore and a Singapore-appointed budget carrier will also have a similar number of flights into Kuala Lumpur," he told a press conference.

"I will attend the ASEAN transport ministers' meeting in Singapore next week and I intend to bring this proposal to my Singapore counterpart," he said, referring to the Association of Southeast Asian Nations.

Chan did not say when the services will begin, but the New Straits Times said it was expected to be in December or January.

It said that AirAsia would also operate two daily flights each from the island tourist destination of Penang and from Kota Kinabalu and Kuching on Borneo island.

AirAsia founder Tony Fernandes said he had not received anything "in black and white" from the government but that the service would be a "cash cow" for the pioneering budget airline.

"I hope to fly to Singapore this December," he told a press conference.

He added that the carrier would use Airbus A320s on the route, which is critically important to AirAsia's ambitions of making Kuala Lumpur a hub for regional low-cost aviation.

"How can we have a hub without flying to Singapore?" he asked.

Singapore Airlines chief executive Chew Choon Seng, speaking in Sydney after the maiden commercial flight of the Airbus A380, said he was not afraid of competition on the money-spinning Singapore-Kuala Lumpur route.

However, he insisted Malaysia give reciprocal rights to Tiger Airways, a budget carrier majority-owned by Singapore Airlines.

"We have nothing against opening up competition," he told AFP. "We only ask for equal rights to have access to Malaysia."

Fernandes said he had no problem with Tiger flying into AirAsia's dedicated low-cost-carrier terminal next to Kuala Lumpur International Airport.

"We want to be a global player so we are prepared for any carrier to fly into the low-cost terminal," he said.

Tiger Airways said Thursday it wants to fly the route as soon as possible, and had approached the Civil Aviation Authority of Singapore to advise them "of its desire to operate this route at the earliest opportunity."

Singapore's government said it was "fully committed" to liberalising air travel between the city-state and Malaysia.

Chew said that the market was big enough to accommodate new entrants.

"I think there's room enough for everybody... as to how far fares will be affected, it all depends on the business model of each company."

AirAsia shares rallied on the news, closing up 11 sens or 5.5 percent at 2.10 ringgit (0.63 dollars).

The budget carrier had mounted an intense campaign to break the stranglehold held by Singapore Airlines and Malaysia Airlines.

Malaysia Airlines had opposed an early opening of the KL-Singapore route, saying it needs more time to carry out a turnaround plan aimed at restoring profitability.