Virgin Express, the Belgian-based budget airline owned by tycoon Sir Richard Branson, has sealed a planned tie-up with carrier SN Brussels.
SN Brussels flies to more than 50 European and African destinations
SN Brussels is the Belgian airline that emerged from the financial wreckage when national carrier Sabena collapsed.
The two airlines have drawn up a deal which ends rivalry between the firms, based at Brussels's main airport.
The pair have been under pressure from Ryanair, which flies from Charleroi, 40 km (25 miles) south of Brussels.
Virgin Express will own 29.9% of SN Airholding, the holding company controlling the two airlines, with private investors behind SN Brussels owning the remaining shares.
SN Brussels shareholders can buy out Virgin's stake for 75m euros (£52.5m; $92m), as long as any deal is done between the first and third anniversary of completion of the new tie-up.
Virgin has the option to sell its stake to SN Brussels for 54m euros.
Although the two airlines will continue to operate separately, they aim to make savings by ending duplication of routes and by using joint purchasing power.
SN Brussels said it expected 44m euros in synergies from the deal. It also hopes to see consolidated earnings of the two companies grow to 35m euros from 25m.
Second time around
"Increased purchasing power combined with the network and cost synergies will result in a competitive aviation platform that is in the best interest of our customers," said Etienne Davignon, chairman of the holding company SN Airholding.
He told RTBF radio that he did not expect any job
losses in the near future.
The merger between the airlines, who called off a merger proposal in 2002, has come after six months of talks.
Two years ago they decided that marriage then 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.
Sir Richard's main airline business is Virgin Atlantic, which operates transatlantic routes between Britain and the US.