Malaysia Airlines today said it has dropped a proposed joint venture with Australia's Qantas Airways for aircraft maintenance and repair.

Managing Director Idris Jala said discussions were halted after a preliminary agreement for the Malaysian project inked in 2007 lapsed recently.

The news came amid new woes at Qantas, which on Tuesday slashed its annual profit forecast and said it would cut up to 5 percent of its work force as it grounds some aircraft due to a slump in business and first-class travel.

"It is very clear that all airlines have immediate problems (amid the economic crisis) ... therefore, there are no active discussions between us," Jala told reporters.

The Malaysian carrier had said in December it was in talks with a number of airlines including Qantas on possible partnerships. Jala did not say if the two are still in tie-up talks.

Airlines globally have been hit as the global economic malaise hurts demand for air travel.

Qantas yesterday cut its full year pretax profit outlook to between AU$100 million and AU$200 million ($73 million and $146 million), from its previous forecast of AU$500 million.

The carrier, which employs more than 34,000 people, also said it would ax up to 1,750 positions in the latest round of cost cutting.

Jala said Malaysia Airlines' long-haul business has also suffered a beating but travel within the domestic and Asian markets remained resilient.

The flag carrier launched nine bargain deals under a "stimulus package" for travelers, offering cheaper fares, free tickets and extra privileges to spur sales.

"The idea of one size fits all doesn't apply in times of crisis... we have to tailor products based on the size of the wallet, that's the way to survive," Jala said.

Malaysia Airlines remained in the black last year but net profit shrunk to 244 million ringgit ($67.8 million), down from a record 851 million ringgit ($263 million) in 2007. In the last quarter alone, profit plunged 81% as the economic slump hurt air travel.

The International Air Transport Association last month predicted Asia Pacific carriers will see losses surge from $500 million in 2008 to $1.7 billion this year. This was much worse than the $1.1 billion loss that it forecast earlier.