The possible merger between AirAsia and Jetstar could involve a share swap and would help the carriers cope with the impact of slowing demand worldwide as the global economy weakens, The Star newspaper said.

Merger talks are at a preliminary stage, the report said.

Asked to comment, AirAsia Chief Executive Tony Fernandes told the newspaper: 'We are always talking and looking at ways to strengthen AirAsia into a global brand.

A Qantas spokesman told the paper: 'We talk to airlines all the time about possible partnerships, relationships and cooperative agreements.'

Qantas and British Airways had earlier this month called off talks for a $6.4 billion (S$9.28 billion) merger.

Mr Fernandes has said that AirAsia may be taken private. -- REUTERS