Thai Airways International (THAI) is in negotiations with budget carrier Nok Air to hand over aircraft and unprofitable domestic routes.
As THAI refreshes its fleet, the airline is said to be keen to focus on international routes and key domestic destinations beyond Bangkok, such as Phuket and Chiangmai.
THAI has a 39 percent stake in the low-cost carrier but there has been friction between the tow operations that have now been resolved.
Thai AirAsia has made a substantial impact on Thailand's aviation sector and the growing international network of the AirAsia family, including an increasing number of long-haul routes, provides short-haul business and leisure passengers with a viable alternative.
Nok Air ran up losses of several million dollars but this year, after slashing routes and jobs, has returned to profitability. Attempts to add international routes, to India and Vietnam.
The renewed THAI-Nok alliance is to include THAI transferring six 737-400 aircraft to Nok. THAI currently has a 39 percent stake in Nok but hopes to increase that to 49 percent soon.