Airline Merger?

A Lufthansa executive quoted by Denmark's Jyllands-Posten newspaper, however, did not say if a possible merger was being considered. SAS shares climbed some 15 percent in late afternoon trading on the Stockholm bourse.

"After the German and Italian markets, Scandinavia is one the most important for Lufthansa," Lufthansa executive Karsten Bentz was quoted as telling the Danish daily.

"We wish to be active in the consolidation under way of the European aviation business, and that is an item discussed by the Lufthansa board," Bentz said.

He declined to comment on a possible merger with SAS but said talks were ongoing, the report said.

SAS cost cutting

SAS management has launched several cost-cutting measures in order to reduce losses, and is currently trying to negotiate wage cuts with unions.

Analysts have said such measures are a likely prerequisite for a potential suitor to make a bid.

In mid-December, SAS said it had inked a preliminary deal to sell its Spanish subsidiary Spanair to a group of investors and also announced it was to sell its stake in the Latvian national airline,

airBaltic.

The governments of Norway, Sweden and Denmark own a 50-percent stake in SAS, while private shareholders hold the rest.