As the final round of negotiations began last night the two sides indicated that there would be no statement until early next week.
There were growing fears, however, that the deteriorating financial position of Dan-Air might make it impossible to agree terms.
Dan-Air is thought to be heading for losses of between pounds 30m and pounds 40m this year, compared with the pounds 20m profit forecast at the time of its pounds 50m recapitalisation last year. 'It certainly isn't a pretty picture,' one source close to the talks said.
The package first outlined two weeks ago would involve Dan- Air's institutional shareholders putting up another pounds 40m and Mr Branson investing about pounds 10m in what would in effect be a new European airline carrying the Virgin name and controlled by him.
Another option is a marketing an operational link-up between Dan-Air and Virgin, backed by institutional investors, which would enable Dan-Air to continue trading through the winter season.
A third option, strongly resisted by Dan-Air, would be for the airline to be put into administration and a new business built around its core profitable routes.
Even if agreement were to be reached, it would almost certainly involve route closures and cutbacks among Dan-Air's staff.