Emirates Airline concluded a "positive" round of talks with the Sri Lankan government last week over its management contract with SriLankan Airlines, Gulf News reported.
The airline owns a 43 per cent stake in Sri Lanka's national carrier and also manages the airline under a 10-year contract, which expires in March 2008.
SriLankan is majority owned by the Sri Lankan government.
"It seems very positive, but nothing solid has been announced as of yet," the paper quoted a source as saying. Final negotiations could take place in the next two to three months.