Etihad Airways is reported to be close to agreeing an investment in troubled Alitalia.
The Abu Dhabi carrier has set a 30-day deadline to decide whether to buy a stake in the ailing Italian carrier.
The airlines said they are in the “final phase” of talks, although neither side disclosed the size of the possible investment.
There have been reports that the fast-expanding Middle East airline could take up to 40%.
A deal would give Etihad a stake in one of Europe’s biggest travel markets.
Alitalia flies about 25 million passengers a year, but is weighed down by debts of about €800 million.
Etihad has taken stakes in carrier such as Air Berlin, Aer Lingus and Virgin Australia.
Air France-KLM, previously Alitalia’s biggest shareholder, declined to support a capital increase last year after losses rose at the Italian airline and a turnaround effort failed to bear fruit.
The Italian airline, which had to be bailed out by the government, employs about 14,000 staff and is regarded as one of the country’s more important business assets
Etihad is in the final stages of reviewing Alitalia’s books to decide on an investment, chief executive James Hogan and his Italian counterpart Gabriele Del Torchio said yesterday.
Italian prime minister Enrico Letta, speaking yesterday in Abu Dhabi, said his government, which has helped prop up Alitalia, would not impose conditions for an agreement.
Del Torchio said on Sunday that a deal would be “an important step in creating a solid and competitive Alitalia”.