EasyJet has declined to comment on a newspaper report linking it as a suitor for Monarch Airlines.
The budget airline is said to have held talks on acquiring its Luton airport-based rival.
Monarch is owned by Greybull Capital, the same family investment fund that is buying Tata Steel's Scunthorpe steel plant.
Greybull rescued Monarch from the brink of collapse 18 months ago through a cost-cutting turnaround strategy.
Monarch has since appointed Deutsche Bank to examine its options and handle prospective bidders.
If easyJet's bid succeeds it would acquire 100% of Monarch and its assets, the Sunday Times reported,
Monarch would provide easyJet with lucrative take-off and landing slots at Gatwick, as well as increased capacity at Manchester, Birmingham and Luton.
EasyJet would be up against a range of other bidders, including China's HNA group, although the rival bidders would only be allowed to take a 49% stake in the business due to restrictions on foreign ownership of airlines.
However, sources close to the airline said Greybull could choose not to sell and instead acquire another ailing carrier, the newspaper reported.
Any offer by easyJet could be complicated by Monarch’s planned switch to Boeing aircraft while the budget airline operates an all-Airbus fleet.
Monarch said: “The continued success of Monarch has generated inbound interest and Deutsche Bank is continuing to work with us to evaluate both inbound and outbound opportunities.”
EasyJet declined to comment.
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