The provider of Aer Lingus' regional services, Stobart Air, along with related aircraft leasing business Propius have been bought by UK firm Stobart Group.
It will pay £300,000 initially, but the transaction could ultimately cost up to £8.55m over time, depending on whether certain equity valuations are achieved.
Stobart Group is buying the carrier and leasing company from EY, which is acting as administrator to Connect Airways, the parent company of Dublin based Stobart Air.
The move will leave Stobart Group with an effective indirect economic interest of 78.75% in Stobart Air and Propius.
However, Stobart Air will continue to be 51% owned by its Employee Benefit Trust.
"This transaction allows Stobart Group to take control of the outstanding legacy issues which date back to 2017 when Stobart Air and Propius became subsidiaries of the Company," said Warwick Brady, CEO of Stobart Group.
"The original strategy to mitigate these issues over time through the combination of the businesses with Connect was impacted by the failure of Flybe and resulting administration of Connect in March 2020."
"We believe that Stobart Air has a viable future after COVID-19 and are working with Aer Lingus as our franchise partner to place the business on a secure footing and manage the impact of the legacy obligations in a controlled manner."
Propius is the lessor of eight aircraft to Stobart Air, which itself operates both Aer Lingus’ regional services as well as charter and so-called wet-leasing operations.
Stobart Group previously owned both firms, but sold them to Connect Airways – a joint venture between Stobart Group, Virgin Atlantic and Cyrus Capital Partners that was formed to buy Flybe - in February of last year.
Connect had operated both Stobart Air and Propius separately from Flybe, which entered into administration earlier this year.
Stobart Group said it was buying both entities as it had acted as guarantor for Propius' obligations and had given guarantees over Stobart Air’s franchise agreement with Aer Lingus, as well as fuel and currency hedging arrangements.
"The Board of Stobart Group has reviewed all options available to the Company in relation to the future of Stobart Air and Propius during this unprecedented time," Stobart Group said in a statement.
"This included allowing the businesses to enter some form of insolvency process and a range of ways to support them going forward particularly in light of the strong relationship which exists between Stobart Group and Aer Lingus."
"The Board has concluded that the best course of action financially for the Company and its shareholders is for it to buy back Stobart Air and Propius. This action will give Stobart Group effective control over the pre-existing obligations it has in respect of those businesses."
Stobart Group says it will continue to talk to Aer Lingus about a long-term franchise extension.
The company also says it expects to the fund the operations of Stobart Air and Propius to the tune of €25m over the next year and will continue to fund it until it begins to make money again.
According to Stobart Group, the value of the combined gross assets of Stobart Air and Propius at the end of August last year was £91.2 million.