Stobart Group Ltd (LON:STOB) shares soared on Friday after it teamed up with Virgin Atlantic and a New York-based hedge fund to take out cash-strapped Flybe Group PLC (LON:FLYB) in a cut-price £2.2mln deal.
There had been speculation that Virgin would make an offer for Flybe, since the carrier put itself up for sale late previous year.
Warwick Brady, chief executive of Stobart Group, said it would also be an opportunity to get more passengers to fly from Southend airport, which it owns, along with Carlisle airport.
Lucien Farrell, partner of Cyrus, which helped Virgin sell its Virgin America arm to Alaska Airlines a year ago, added: "We believe Flybe's United Kingdom regional focus and high quality management, together with Virgin Atlantic's dedication to the best customer experience and Stobart Group's expertise in regional flying, will produce a world-class airline".
Cyrus is the lead partner with a 40% stake, and the United States hedge fund is also taking a 4.65% interest in Stobart after agreeing to invest £24.7mln.
The price represents a significant markdown on Flybe's Thursday closing price of 16.38p.
Rising oil prices and the weakening of sterling have put airlines under intense pressure, with a deepening industry price war accentuating the financial squeeze.
"By combining to form a larger, stronger, group, we will be better placed to withstand these pressures".
The trio has committed to make a £20 million bridge loan available to support Flybe's current operations, while another £80 million will be provided to the combined group.
It will lend £20m to keep Flybe afloat and following completion of the acquisition will provide a further £80m to invest in its business and support its growth, as well as a contribution of Stobart Air.
Virgin Atlantic, the airline founded in 1984 by billionaire entrepreneur Richard Branson, is now majority-owned by USA airline Delta, with a 49pc stake.
Flybe acquired British Airways' BA Connect unit for 521 million pounds in 2006, adding more than 50 routes and doubling the number of customers to become No. 1 in Europe's regional market. "We aim to provide an even better service to our customers and secure the future for our people".
The consortium's bid, if accepted by shareholders, would seek to feed regional customers to the long-haul networks of Virgin Atlantic and its American joint venture partner, Delta Air Lines, at Heathrow and Manchester airports.
"In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM".
"The combined entity will be a powerful combination with sufficient scale to compete effectively in the United Kingdom and European airline markets".