Etihad Airways, the Abu Dhabi-owned airline, is set to announce a far-reaching code share agreement with Air France-KLM on Monday, two people familiar with the agreement said.

The deal, which will not include an equity stake, signals a thawing of relations between Europe’s flag carriers and the younger Gulf airlines.

In addition, another code-share will be announced on Monday between Air Berlin, in which Etihad bought a 29.2 per cent stake in December, and Air France, furthering strengthening Etihad’s European links.