Flybe has agreed a deal with Ryanair which could see the Exeter-based airline paid around £87m to take over a number of aircraft and routes from the Irish carrier.
Talks have been taking place between the two companies as Ryanair seeks to allay the European Commission's competition concerns surrounding its bid for Aer Lingus.
In a statement to the stock exchange, Flybe today said: "Flybe confirms that it has reached an agreement in principle with Ryanair about the possible transfer of a number of aircraft and operating routes as part of a package of concessions Ryanair has submitted to the European Commission.
"The agreement provides for a new company to be incorporated into which the relevant business assets (including cash of 100 million euros) and liabilities would be transferred and which Flybe would then acquire."
The agreement still requires the approval of Flybe's board and shareholders, and would depend on the Commission's ruling on Ryanair's bid.
Media reports suggested that if deal goes ahead, Flybe would acquire 43 routes from Aer Lingus – almost half the Dublin-based carrier's short-haul network – and more than 10 aircraft and associated crew.
Flybe shares were up around three per cent this morning following the news.
It comes as Flybe plans to shed around 300 staff, including 95 in Exeter, as part of a turnaround plan aimed at returning the airline to profitability.