A deadline of May 7 has reportedly been set by Thomas Cook for expressions of interest in its airline business.
Indigo Partners and Lufthansa are being tipped as among likely bidders.
The airline would fetch less than €1 billion (£859 million), Reuters reported a banking source as saying. Thomas Cook has a current market value of just over £400 million.
The travel group put its airline business up for sale in February after profit warnings in 2018 left it needing to raise cash.
Thomas Cook’s airlines include Condor in Germany as well as UK, Scandinavian and Spanish operations.
A sale of the business, in whole or in part, would enable the world’s oldest tour operator to invest more in its own hotels and improve its online sales.
A source familiar with the discussions told Reuters that Indigo and Lufthansa appeared most interested in the business.
British Airways owner IAG should not be ruled out and easyJet has engaged in talks but is seen as less interested, the source added.
Another source said that private equity groups KKR and Apollo might also look at taking over the whole of Thomas Cook.
The airlines business would provide access to valuable European slots linking the UK to Spain, Greece and Turkey.
Thomas Cook, Indigo, IAG and easyJet declined to comment, was not immediately available.
Lufthansa executives have repeatedly said that the German airline wants to “play an active role” in consolidation.
Indigo, the private equity firm managed by US low cost airline investor Bill Franke, has previously made investments in several airlines including Wizz Air.
Sources said that competition issues could influence which parts of the business different suitors go for.
China’s Fosun International, a Thomas Cook shareholder, has been reported as being interested in its tour business.
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