Air France-KLM, the world's largest airline by revenue, is studying a potential merger with either Italy's Alitalia or Spain's Iberia, the Financial Times reported on Monday.
Air France's chairman and chief executive Jean-Cyril Spinetta said in an interview with the paper the "consolidation process was not finished; there will be other steps."
Alitalia's long-time commercial partner Air France-KLM is frequently cited in Italian media as a likely buyer for the airline -- whose privatisation flopped in July -- despite repeated denials by the French airline.
Spinetta said Air France KLM had held "informal" talks with potential Spanish financial partners, though it was not yet in talks with Iberia.
"Iberia is in good shape, but I understand that the shareholders and management think that consolidation is inevitable and that it is better to anticipate this than to wait and have to act in a more difficult situation," the CEO was quoted as saying.
"We are in the phase of evaluating the potential for cooperation with Iberia," he added.