Virgin Express, the Brussels-based budget airline owned by tycoon Richard Branson, has drawn up terms for a potential merger with SN Brussels.
Richard Branson controls Virgin Express
SN Brussels is the Belgian airline that emerged from the financial wreckage when national carrier Sabena collapsed.
The two airlines have mapped out a deal which gives Mr Branson the option of selling his slice of Virgin Express.
An SN spokesman said a decision on whether to go ahead with the tie-up would be taken "within a few months".
Second time around
Virgin Express and SN Brussels have jilted each other in the past, calling off a merger proposal in 2002.
No-frills carrier Virgin Express and full-service airline SN Brussels decided that marriage would not suit their divergent business models.
SN Brussels flies to more than 50 European cities and has routes to Africa. It has 38 aircraft and employs nearly 2,000 people.
Virgin Express operates on a smaller scale, covering only European routes with just 12 planes and about 800 staff.
The deal mapped out in their non-binding letter of intent envisages two separate airlines with their own identities.
But they would rationalise their schedules and benefit from cost savings.
The deal would create a new parent company owned 70% by SN Brussels and 30% by Virgin Express, controlled by Mr Branson through a majority shareholding.
He would get the right to sell Virgin Express to the new company for a pre-agreed price of 64m euros ($78.9m; £43.4m) at any time in the two years from January 2005 to the end of 2006 .
Any move initiated by SN Brussels to buy Virgin Express' 30% during this period would carry a price tag of 100m euros.
Mr Branson's main airline business is Virgin Atlantic airlines, which has a major share of transatlantic routes between Britain and the US.