Air China, the country's flagship carrier, said on Thursday it has signed a code-sharing agreement with Cathay Pacific Airways on flights between Hong Kong and Beijing.

Code sharing is common among major domestic and international carriers who sell and cross-market seats on each others' flights. Marketing alliances have proven popular because they are cheap and easier to launch and manage than mergers.

Cathay holds a nearly 10 percent stake in Air China.

Air China said it will code-share on two Cathay Pacific services from Beijing to Hong Kong and Cathay will attach its code to three of the daily Air China services to and from Beijing.

The code-sharing will start in the fourth quarter.

Earlier in March, local media reported that Swire Pacific was in advanced negotiations that would see Cathay take over Dragonair before itself being subsumed into the Air China group. That takeover talk was denied by both Swire and Cathay.