Flybe, Europe's largest regional airline, held survival talks on Sunday night less than a year after being bailed out by a consortium led by Virgin Atlantic.
Sky News can exclusively reveal that Flybe, which operates more than half of Britain's domestic flights out of London, is trying to secure additional funding amid growing losses.
EY, an accounting firm, has been put on hold to manage Flybe Group management, according to aviation sources.
The airline is one of Britain's best-known aviation brands.
The government is believed to have been informed of the crisis at Flybe in recent days, with more than 2,000 jobs at risk if the company collapses.
A source close to Flybe said Sunday night that the Department of Transportation and the Department of Business, Energy and Industrial Strategy were working to determine whether the government could provide or facilitate any emergency financing for the company.
If Flybe fails to reach a bailout deal, it would be the second major collapse of an airline in four months after the Thomas Cook Group implosion last September.
Flybe operates about 75 aircraft and serves more than 80 airports throughout the United Kingdom and Europe.
In Britain, it has a significant presence at airports such as Belfast, Birmingham, Manchester and Southampton.
Under an agreement concluded last March, a consortium of Virgin Atlantic, Stobart Group, owner of Southend Airport, and Cyrus Capital Partners acquired Flybe's operating assets.
Flybe was sold to a consortium led by Virgin Atlantic last year
Cyrus Capital owned most of a newly formed Connect Airways company, with 40 percent, while the other partners owned 30 percent each.
Virgin Atlantic executive Mark Anderson was installed as chief executive of Connect Airways.
The consortium has pledged to inject £ 100 million into Flybe's recovery plan, with the company being renamed Virgin Connect later this year.
Experts said, however, that Connect's proposed funding requirements have become more costly, potentially leaving Flybe on the verge of collapse.
It is unclear on Sunday how any bailout financing involving the government can be structured.
If a survival bid fails, however, it would embarrass a government driven by its numerous new Commons seats in constituencies located near some of the northern airports Flybe serves.
Flybe serves over 80 airports throughout the United Kingdom and Europe
The regional airline came close to total collapse a year ago, in the midst of a fierce takeover battle that made shareholders furious that its assets were left worthless.
This came just months after Flybe's board had rejected a 40p per share takeover bid.
Flybe launched a formal sale process in the fall of 2018, blaming a toxic cocktail of currency volatility, rising fuel costs and Brexit-related uncertainty.
An industry price war has also exacerbated airline financial problems in recent years.
Flybe, Stobart Group and EY declined to comment Sunday night.