KLM has been seeking a merger for some time

Europe's fourth largest carrier said talks were at an "advanced stage" with the French airline.

KLM has been seeking a merger with another airline for more than 10 years, and first announced it was speaking to Air France in 1999.

Talks on a proposed tie-up with British Airways fell through last month, although the UK carrier has said it will leave the door open for a deal if talks break down with Air France.

'Confident'

Air France, which is 54% owned by the French government, is refusing to comment on the proposed deal.

But KLM has said talks were "going well", although it refused to comment on whether the tie-up, which would see KLM joining Air France's SkyTeam marketing alliance, would amount to a full merger.

"Our talks with Air France are in an advanced stage, and they're going well," KLM spokesman Bart Koster told The Associated Press in Amsterdam.

"But there are still points of discussion on the table that we haven't resolved and that will have to be resolved before we can say 'yes, we have an agreement' and set a date.

"We're confident that we'll be able to make a choice about a strategic partnership this year," Mr Koster said.

Brand identity

News of the proposed merger sent KLM's shares soaring 8.8%.

French financial newspaper L'Agefi reported on Friday that the two airlines would announce a deal on 18 September.

The boards of both companies are scheduled to meet on 17 September to discuss the deal, which will see Air France will buy 100% of KLM.

KLM shareholders will receive 15% of the French government-owned stake in Air France, L'Agefi said.

The French government will then sell 20% of its 54% stake in Air France on the market, thus reducing its stake in the combined entity to under 20%, the newspaper said.