After Air India-Indian Airlines, Jet Airways-Sahara and Kingfisher-Deccan Aviation, another aviation merger is in the air.

Madurai-based Paramount Airways is interested in acquiring the Mumbai-based budget carrier GoAir, promoted by the Wadia group.

Sources close to the developments said the investment bankers of Paramount Airways have expressed their interest and initiated discussions with GoAir representatives. The talks, however, have not made much headway as yet as GoAir is reluctant to move ahead.

Paramount Airways, which currently operates only in south India, has firmed up plans to enter the western region. GoAir has only four leased aircraft but Paramount is more interested in its slots, parking bays, pilots and other infrastructure, sources said.

GoAir had earlier indicated its plan to dilute 26-40 per cent equity through a private equity placement.

Paramount Airways managing director M Thiagarajan was not available for comment, while GoAir chief Jeh Wadia denied any such development.

"This is baseless speculation. We are going ahead with our expansion plans," Wadia told Business Standard.

Wadia had said earlier that GoAir was working on a flexible fleet management plan to achieve growth. The airline is scheduled to receive the first of its 20 new aircraft in October. "We plan to expand our current fleet to at least 18 by March 2009 and to 34 by March 2011," he said.

GoAir operates Airbus A320 aircraft with 180 seats, while Paramount operates Brazil's Embraer aircraft with 60 to 90 seats.

The business models are also different for the two airlines. GoAir is a low-cost carrier competing with Air Deccan, SpiceJet and IndiGo, while Paramount Airways is positioned as a high value carrier, with only business class and first class seats. It is competing with full-service carriers such as Jet Airways [Get Quote] and Kingfisher Airlines.

Paramount Airways is promoted by Madurai-based textile manufacturing and export house Paramount Mills, while GoAir has been floated by the Wadia group, with well known brands like Britannia [Get Quote] and Bombay Dyeing [Get Quote].

GoAir, with its four aircraft, currently operates 61 flights daily connecting Ahmedabad, Bangalore, Chennai, Cochin, Delhi, Goa, Hyderabad, Jaipur, Jammu, Mumbai and Srinagar.

With five Embraer regional jets, Paramount Airways currently links eight south Indian locations with 52 daily flights.