Air New Zealand and Qantas will codeshare on domestic routes on each side of the Tasman.

The deal comes as Air New Zealand prepares to part with Virgin Australia at the end of October.

Under the codeshare, Qantas intends to add its code on up to 30 routes on Air New Zealand's domestic network, while Air New Zealand intends to add its code on up to 85 routes on Qantas' domestic network.

The airlines say co-ordination of check-in and handling at airports will mean shorter connection times, opening up more onward flights for customers on each carrier's domestic networks and faster journey times overall.

Eligible customers will have access to a combined total of 36 domestic lounges on both sides of the Tasman when flying on routes covered by the codeshare agreement.

Qantas Group chief executive Alan Joyce said the two national carriers had a lot of shared history as well as a shared goal of making travel easier.

Air New Zealand chief executive Christopher Luxon said the codeshare will see two of the world's best airlines offer their customers a full service experience when they make domestic connections within New Zealand or Australia.

"While the two airlines will continue to compete very strongly across all markets, Air New Zealand and Qantas are known for having a commitment to innovation, customer service excellence, operational performance and safety. ''

''Over time'', the airlines could explore areas of mutual interest, including research into biofuels, freight and ground-handling opportunities.

The codeshare and customer offering will exclude transtasman flights. Qantas will continue to codeshare on all connecting Jetstar New Zealand services.

Tickets for the codeshare services will be available by the end of July for travel from October 28, when the Virgin Australia deal ends.

While the deal is a sign of a warming relationship between Air NZ and Qantas, it is short of the Air NZ-Virgin alliance which involved co-ordinating flights and ticket prices.

Even deeper commercial arrangements between airlines can involve revenue sharing.

Unlike those sorts of deals, the codeshare announced in Sydney today will not need the regulators' approval.

Good chemistry at the top has helped push the deal through. Air New Zealand chief executive Luxon and his Qantas counterpart Joyce have traded barbs in the past but increasingly they've been light-hearted around transtasman sporting contests.

And the airlines have grown to have the same look about them. Air New Zealand's transformation was more sudden, initially triggered by its near collapse in 2001, but Qantas has also slimmed down and become more customer-focused.

At a senior executive level there's a mutual respect.

This is the closest the two airlines have become since 2002, when they attempted to enter into a wide-ranging strategic alliance.

That would have involved Qantas paying $550 million for a 22.5 per cent cornerstone shareholding in Air New Zealand, as both battled in a tough environment immediately after the 9/11 terror attacks.

However, the deal collapsed after regulators on both sides of the Tasman rejected it.