VIRGIN and EasyJet are to team up with an Asian airline to create the world's first budget global network.

Richard Branson's Virgin and and EasyJet's Stelios Haji-Ioannou will join forces with AirAsia to form a Malaysia-based alliance, the south-east Asian country's Star newspaper has reported.

It quoted unidentified industry sources as saying that the new joint venture would first fly between Kuala Lumpur and Manchester, and Amritsar in India.

And the alliance - if it decided to fly to London as well - could also use Luton airport as a hub because Virgin already operated a rail link from there to central London, the paper said.

Fares to Britain will be between £43 and £365, about half the price of a ticket on a regular airline, it added.

It said the alliance would give Virgin and EasyJet access to Kuala Lumpur's low-cost airport terminal, the gateway to a dream Asian hub for their Europe-to-Australia routes.

Sir Richard is having talks with AirAsia's Tony Fernandes and recently-knighted Greek-British tycoon Sir Stelios and that plans could include flights to Hangzhou near Shanghai, China and Tianjin near Beijing, according to the report.

AirAsia spokesmen were not immediately available for comment because of a public holiday in Malaysia.

EasyJet, which started in 1995, was one of the first low-cost carriers in the world to sell tickets on the Internet. It flies 224 routes between 67 key European airports including Britain.

Virgin currently carries around five million passengers a year. Its airlines include Virgin Atlantic, which flies to 27 destinations worldwide, and Virgin Nigeria Airways.