Air-India and German carrier Lufthansa have reached a wide-ranging agreement, which would also significantly raise their connectivity from the southern cities of Bangalore, Hyderabad and Kochi to Europe and the United States.

The two airlines, which signed a memorandum of understanding in New Delhi on Tuesday evening, also decided in principle to establish a "broad-based strategic cooperation" in various fields including engineering, commercial and IT services, A-I sources said.

Under the code-share agreement, Air-India would operate four flights a week to Frankfurt from Bangalore and Hyderabad and three from Kochi, while Lufthansa would operate three flights from Bangalore and Hyderabad and four from Kochi.

The MoU was signed in New Delhi by A-I managing director Sunil Arora and commercial director V K Verma and Lufthansa executive board member S Lauer and senior vice president K U Garnadt, an A-I spokesman said, adding dedicated working groups have also been set up by both to work out details of the intended cooperation.

The sources said Lufthansa has also agreed to provide a prime-time slot for Air-India at Frankfurt.

The Indian flagship had been negotiating with British Airways for over three years for such a slot at Heathrow, but no agreement could be reached.

The spokesman said both companies saw "significant business opportunities" to and from India and "acknowledged that a close cooperation and partnership is the best way to participate in this development".

Industry sources said the significant tie-up between Lufthansa and Air-India could also lead Air-India to join the 'Star Alliance' of premier world carriers including Singapore Airlines and United Airlines.