The offer from the group's Air France unit was among 14 bids submitted for privately-held Aigle Azur, which was placed was placed under bankruptcy protection on Sept. 2., ahead of a midday deadline, an official with the CFDT union told Reuters.

Higher fuel costs and stiffer low-cost competition have led to a wave of bankruptcies among smaller European airlines in recent years, including Air Berlin, Germania, British-based Monarch, Latvia's Primera Air and Swiss SkyWork.

An Air France spokeswoman confirmed that it had tabled a bid, declining to give details or further comment.

Air France is seeking to acquire Aigle Azur's valuable take-off and landing slots at Paris Orly airport and expand services on its main routes to Algeria and Lebanon, sources with knowledge of the offer told Reuters.

The proposal would also see the French airline hire about 70% of the defunct carrier's flight crews and cabin staff through a selection process open to all employees, they said.

Air France-KLM shares tumbled after a French government official identified it as a likely buyer, and closed 9.8% lower as details of the offer appeared in media reports.

French junior transport minister Jean-Baptiste Djebbari told Le Parisien newspaper said Aigle Azur needs a "serious buyer who can guarantee a maximum of jobs".

Aigle Azur, whose biggest shareholders are China's HNA Group and Brazilian entrepreneur David Neeleman, has suffered in the wake of a botched expansion from profitable medium-haul services focused on Algeria into long-haul destinations such as Brazil.

Other bids came from Air Caraibes owner Dubreuil Group and low-cost carriers Vueling and Easyjet, whose letters of intent stopped short of detailed bids, the CFDT official said. Easyjet confirmed it had expressed formal interest.

The French state had publicly flagged the Air France bid and Dubreuil's interest in the long-haul business - which could together save about 90% of its 1,200 jobs.

A third bid considered "serious" came from an investor group led by Lionel Guerin, former head of Air France's Hop! unit.

Government influence over Air France-KLM, in which France holds a 14.3% stake, added to investor concern about the offer, with one trader telling Reuters the state was "likely to push them to get involved".

Officials first turned to Air France-KLM after Aigle Azur sought government help in April, according to financial daily Les Echos, and the group's interest was piqued after rival Vueling discussed buying Orly slots from the struggling carrier.

Air France has scrambled extra Algeria flights to help repatriate the 13,000 Aigle Azur passengers still stranded by the collapse. Most will have reached their destinations by the end of the week, the junior transport minister said.

(Reporting by Patrick Vignal and Laurence Frost; Writing by Richard Lough and Laurence Frost; Editing by Louise Heavens/Susan Fenton/Alexander Smith)

By Laurence Frost