Air New Zealand and Virgin Blue has announced Monday that they are seeking regulatory approval for a trans-Tasman alliance that will bring the two airlines to share route services but still short of any merger possibility.

In a report by Reuters, Air NZ chief executive Rob Fyfe said that the two companies will cooperate "to give customers cheaper fares, increased frequency and better connections, while delivering improved returns," as he added that authorities from both Australia and New Zealand should give their nod on the alliance within the next six months.

Under the scheme, the two carriers will code share on flight destinations between the two countries and connecting domestic services, with expected cooperation on passenger lounges and frequent flier programs.

However, the airlines' domestic flights and Pacific services shall be excluded from the deal as Mr Fyfe stressed that the scheme will enable Air NZ to effectively compete with Australian carrier Qantas, which currently services routes between the two countries with an advantage of maintaining a budget carrier too in Jetstar.

In 2003, Qantas and Air NZ held talks on possible cooperation of the same nature but the plan was abandoned when competition regulators disapproved of the alliance.

Amidst the falling numbers of passengers flying last year, Air NZ revealed eight percent capacity reductions on its Australian and Pacific services last month.

At present, the Centre for Asia Pacific Aviation said that eleven carriers are servicing routes between the two countries, of which Air NZ dominates by holding 38 percent of the market as against the combined Qantas and Jetstar shares of 32 percent.

Virgin Blue came in third by securing 18 percent while the remaining shares were distributed to the other minor carriers.