The two airlines - which are both fully owned by the Investment Corporation of Dubai (ICD) and share the same chairman, Sheikh Ahmed bin Saeed Al Maktoum - said they will use the partnership to scale up their operations and accelerate growth.
This will also help the carriers to feed more traffic into each other's complementary networks.
In the fiscal year 2016/2017 which ended on March 31, Emirate posted an annual profit of 340 million US dollars, down 82.38 percent from 1.93 billion dollars last year "due to stronger dollar", said the carrier.
Meanwhile, flydubai's profits dropped 68 percent in 2016 after a tough year - but its revenues rose 2.4 percent, it reported in February.
In a joint statement issued on Monday, July 17, the carriers said their partnership would extend beyond code-sharing and include integrated network collaboration with coordinated scheduling.
The flydubai low-priced model, which relies on single-aisle planes, allows penetration and connectivity of markets that complement the wide grid of Emirates.
The new arrangement will allow FlyDubai passengers access to Emirates' extensive network and enable Emirates customers access to FlyDubai's regional network.
'Game of Thrones' long-awaited season 7 premiere crashes HBO's main site
If you were hiding under a rock last night you might have missed premiere of season 7 of HBO's hit show " Game of Thrones ". Fans of the HBO series took to social media to vent their frustration, unable to watch the show on Foxtel Now.
The airlines will align systems and operations "to ensure a seamless travel experience".
"Given the competitive profit pressure Emirates has faced due to falling prices, lower oil costs and increased airline competition, Emirates can leverage the strength of flydubai's network and dispense the need to buy their own narrow-bodies", said Saj Ahmad chief analyst at Strategic Aero Research.
Their combined global network is expected to serve 240 destinations with a fleet of 380 aircraft by 2022.
Work on combining a number of areas such as network planning and frequent-flyer programmes is already under way and the group said it expects the first new code sharing agreements to be in place in the final quarter of this year.
Emirates, launched in 1985, and flydubai, which started operating in 2009, fly to several of the same destinations, particularly in the Middle East and South Asia.
Emirates has a wide-body fleet of 259 aircraft, flying to 157 destinations, while flydubai operates 58 new-generation Boeing 737 aircraft to 95 destinations.