Air France-KLM of Europe has teamed up with United States-based Delta Air Lines to consider a bid for Virgin Atlantic.
Owner Richard Branson is presently considering his options for the carrier in an increasingly competitive market.
Deutsche Bank has been appointed to examine strategic options, with a sale of Branson’s 51 per cent stake now a growing possibility.
Singapore Airlines holds the remaining shares in Virgin Atlantic after buying a 49 per cent share for £600 million in 1999.
Air France-KLM and Delta – already partners as part of the SkyTeam Alliance – are believed to be among the frontrunners for any deal.
Any deal would cost between £700 million and £1 billion, with Virgin Atlantic’s key landing slots at Heathrow central to any deal.
Delta Air Lines recently lost its position as the biggest airline in the United States following the merger of United and Continental Airlines.
The move is part of a growing global consolidation trend.
In Europe British Airways recently merged with Iberia of Spain in a £5.2 billion deal to create International Airline Group (IAG).
Branson was public in his opposition to the deal and its eventual success may have prompted his decision to sell.
IAG has also secured a partnership with American Airlines on lucrative transatlantic routes, further squeezing Virgin Atlantic.
Etihad – recognised by the World Travel Awards as the World’s Leading Airline - is also thought to be interested in buying Sir Richard’s stake.
Chief executive James Hogan has written to Deutsche Bank to express an interest in a potential deal.
Etihad - the carrier owned by the ruling family of Abu Dhabi - has hired Bank of America Merrill Lynch to advise it.
Last year Air France and Delta joined to invest £1.3 billion in Japan Airlines, the ailing Asian carrier.
Japan rejected the approach in favour of remaining in the Oneworld airline alliance with American Airlines and British Airways.