Low-cost carrier WOW Air has restarted talks with rival Icelandair after negotiations with another investor failed, the two Icelandic airlines said.
Indigo Partners, a private equity fund managed by veteran low-cost airline investor Bill Franke, cancelled its proposed investment.
Icelandair said its board had now agreed to start discussions with WOW air about the "involvement in its operations".
Icelandair last year scrapped an all-share deal to buy the privately-held airline.
Wow Air faces pressure from creditors and lessors and has already said it will reduce its fleet to 11 aircraft from 20 and cut 111 jobs.
Icelandic authorities will be involved in the discussions, which are expected to conclude by March 25.