Flybe has agreed a deal with Ryanair to create an Irish carrier known as Flybe Ireland if Ryanair succeeds in its bid to take over Aer Lingus.
Flybe said it has reached agreement over the possible transfer of some aircraft and routes with Ryanair as part of its attempts to win approval from the European Commission for its bid for Aer Lingus.
Ryanair is making its third takeover attempt of Aer Lingus and needs to make concessions that would retain competition in air transport to and from Ireland.
UK-based Flybe said it would pay Ryanair €1m for the newly created airline.
The deal would see Ryanair transfer to Flybe Ireland 43 European routes, at least nine Airbus A320 aircraft and an undisclosed number of flight crew, engineers, management and facilities to operate the business.
Ryanair will also provide Flybe Ireland with a cash injection of €100m and forward sales cash and liabilities worth around €50m.
Flybe, which is a low-cost regional airline group operating over 180 routes to 65 European airports, is looking to reduce its reliance on revenues from Britain.
"The terms of the deal negotiated ensure that Flybe Ireland will be a well-capitalised, well-funded company, enabling us to deliver upon that strategic aim," said Flybe chief executive Jim French.
"However, before Flybe Ireland can come into being there are many hurdles to overcome, not least the EC accepting the remedies offered by Ryanair in its offer to take over Aer Lingus, and then the shareholders of Aer Lingus accepting an offer from Ryanair,'' he added.
Flybe also said it has received irrevocable acceptances representing 64% of the shareholders in support of this possible deal. The European Commission had insisted on the pledging of irrevocable acceptances by over 50% of Flybe’s shareholders as a condition precedent for the deal to create Flybe Ireland proceeding.