Rumours of an imminent capital injection swirled around Kingfisher Airlines yesterday as the Indian carrier struggled after recording 10 straight quarters of losses.
The airline is understood to be in talks with at least two international rivals in a bid to stave off collapse, The Times of London reported.
Kingfisher is also seeking new funds after grounding planes, failing to pay wages and cutting flights as it struggles under US$1.3bn (Dh4.77bn) of debt.
Any deal, however, would require the Indian government to change the law regarding foreign investment. A panel of Indian ministers last month approved a proposal to let overseas airlines buy stakes of up to 49 per cent in domestic carriers, but the proposal needs cabinet approval.
The overseas carriers were yesterday reported by The Times of London to be Abu Dhabi's Etihad Airways and International Consolidated Airlines Group (IAG), which owns British Airways and Iberia.
IAG said yesterday it was "too early to speculate" on its interest in Indian carriers. However, Willie Walsh, the chief executive, said last year that the company might consider investing in India.
"We never comment on speculation of this nature, except to say that we talk regularly and frequently to many airlines and a range of other businesses from all over the world about issues and opportunities," an Etihad spokesman told The National.
Etihad is known to be considering more airline investments - it bought a stake in Air Berlin last year - but this month, James Hogan, the chief executive, said the airline was not looking in India "at the moment".
Kingfisher's troubles have led to it cutting operations to 175 daily flights from a peak of 400 six months ago, and reducing its fleet to 28 aircraft from 64. The aircraft Kingfisher now owns are mostly pledged to lenders.
About 300 pilots have resigned and the carrier is also losing prime slots at key airports.
The airline is owned by the Indian billionaire Vijay Mallya, who has a $1.11bn fortune, according to Forbes magazine.
Mr Mallya owns 58.61 per cent of Kingfisher. His previous plan to raise funds through a share sale stalled, and he has been lobbying the government to get state-run banks to lend more.
But a senior executive at State Bank of India (SBI), the lead lender to Kingfisher, said at the weekend it would not consider any fresh loans for the carrier until Kingfisher raised new equity itself.
"Everything depends on equity infusion, how much comes in, whether that will meet the requirements," said the bank's deputy managing director, R Venkatachalam.
The Indian government has also ruled out a bailout. But a Kingfisher collapse would be the biggest failure in Indian aviation history and would hurt state-run banks, which own about a fifth of Kingfisher's shares and three quarters of its $1.3bn debt. It would also hit the sector in the short term.
"If you see such a substantial number of seats being removed from the market suddenly, it will have a very adverse impact on the fares," said EK Bharat Bhushan, the chief of India's aviation regulator, the directorate general of civil aviation.
"In the short term, Kingfisher is in urgent need of money," Sharan Lillaney, an aviation analyst at Angel Broking, told Reuters.
"If they get about 10bn rupees [Dh745.4m) now, that will last them about three to six months, and after that we will definitely have FDI [approval for foreign direct investment]."