Air-India is considering an offer for Serbia's national carrier, Jugoslavenski Aerotransport (JAT), setting up a potential bidding war with Russia's Aeroflot, the Financial Times said on Monday.
"Air India and JAT are talking about an eventual merger or other kind of partnership," a JAT spokeswoman told the FT.
The FT said an Air India official confirmed the airline was interested in JAT.
The spokeswoman for JAT said that Air-India officials had been in Belgrade on Friday to conduct due diligence on JAT.
Serbia's new government has said the privatisation of JAT would be among its priorities. A JAT official recently said Aeroflot had made the best proposal so far for JAT.
Air-India, India's state-owned international carrier, is in the process of being merged with domestic carrier Indian to take on growing competition in the fast-growing Indian market.