Etihad Airways president James Hogan has confirmed the airline has entered the final phase of a due diligence process about a possible investment by Etihad in Italian flag-carrier Alitalia.
During the next 30 days both companies and their advisors will determine how a common strategy can be developed which meets the objectives of both parties.
Neither side disclosed the size of the possible investment.
However, there have been reports the fast-expanding Gulf airline could take up to 40 per cent.
Etihad has taken stakes in Air Berlin, Aer Lingus, and Virgin Australia.
Abu Dhabi based Etihad also recently launched regional services in Europe following a deal with Darwin Airline of Switzerland.
Alitalia flies about 25 million passengers a year, but is weighed down by hundreds of millions of euros in debts.
It employs about 14,000 staff and is regarded as one of the country’s more important business assets.