Regional carrier Flybe has been saved from bankruptcy by a consortium of buyers including Virgin Atlantic and Stobart Group.
Forming a new company, Connect Airways, the pair will join Cyrus Capital to acquire Flybe for a total of £2.2 million.
Current Flybe shareholders will receive one pence per share.
Christine Ourmieres-Widener, Flybe chief executive, said: ““The industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit.
“We have been affected by all of these factors which has put pressure on short-term financial performance.
“At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.
“By combining to form a larger, stronger, group, we will be better placed to withstand these pressures.
“We aim to provide an even better service to our customers and secure the future for our people.”
Stobart Group will contribute Stobart Air and Propius, Stobart’s aircraft leasing business into Connect Airways.
Connect has committed to make available a £20 million bridge loan facility to support Flybe’s ongoing working capital and operational requirements.
In addition, following completion of the acquisition, Cyrus, Stobart Group and Virgin Atlantic are intending to provide up to £80 million of further funding to the group to invest in its business and support its growth, as well as a contribution of Stobart Air.
Shai Weiss, chief executive of Virgin Atlantic, said: “Together, we can provide greater connectivity to our extensive long-haul network and that of our joint venture partners Delta Air Lines, at Manchester Airport and London Heathrow.
“In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”
Flybe will continue to serve customers and communities across the UK and Ireland.
In due course Flybe will be rebranded to Virgin Atlantic.
The group intends for Flybe to continue as an independent operating carrier with a separate UK Air Operator Certificate under the Virgin Atlantic brand.
Stobart Air is intended to continue under a separate Irish AOC.
Warwick Brady, chief executive of Stobart Group, said: “The board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in regional airline consolidation.
“The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets.
“It will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend Airport.”
The group will operate independently to Virgin Atlantic under one management team, owned 40 per cent by Cyrus Capital Partners, 30 per cent by Stobart Aviation, a wholly owned subsidiary of Stobart Group, and 30 per cent by Virgin Atlantic Limited, the holding company of Virgin Atlantic Airways and Virgin Holidays.