Two of three Singapore-based budget airlines, Valuair and Jetstar Asia, have agreed to merge in a first sign of consolidation among Southeast Asia's fledgling low-cost carriers, The Business Times reported on Tuesday.

The merger will form a larger company that will receive a capital injection of more than SGD$50 million (USD$29.6 million) from Qantas Airways' associate Jetstar, the paper said, quoting sources.

Valuair shareholders, including cruise operator Star Cruises and Asiatravel.com, will become minority shareholders of the enlarged airline.

Singapore's state investment agency Temasek Holdings owns 19 percent of Jetstar.

The deal is expected to be completed by the end of the year, the paper said.

Tiger Airways, a third discount carrier based in the city-state, has said it will not break even this year and wants a partner to help it set up a second base outside of Singapore.