Oneworld member Finnair and UK regional carrier Flybe are to acquire Finnish Commuter Airlines and establish a new Scandinavian airline, to be branded Flybe Nordic.
Flybe Nordic will be 60%-owned by Flybe with Finnair holding the balance. The joint venture will take over Finnish Commuter Airlines from owner Finncomm for €25 million ($36 million) plus net cash.
Finnair will pay €13 million in cash for its share. Flybe will pay €12 million.
Nine ATR 72 turboprops used by Finnish Commuter - plus three more on order - will be purchased by Finnair for €104 million, which will then lease them back to the carrier following the Flybe Nordic takeover. The acquisition price includes €70 million in debt liability.
Four other aircraft, ATR 42s, will be leased to the new carrier by Finncomm and it will also continue to have access to two leased Finnair Embraer 170s.
"There's a huge demand and undersupply in the industry for the ATR aircraft," said Finnair chief Mika Vehvilainen.
"For Finnair this is a great opportunity to strengthen our fleet and, as such, it is a smart investment and ensures that our new venture will have the required capacity from day one."
The takeover follows months of discussions after Flybe originally agreed to perform feeder flights for Finnair - a deal which appeared to founder shortly afterwards when Finnair instead arranged a feeder pact with Finnish Commuter, and entered talks to take a 20% stake.
But the tie-up had taken longer to complete than expected and Finnair had stated that it was looking for additional investors in Finnish Commuter.
Under the new agreement Flybe will take over the day-to-day operation and management of the airline from 1 August. Flybe's brand will be used on Finnish Commuter's current domestic routes.
"We believe that Flybe's point-to-point experience and unique business model will complement Finnair's international network competencies in an optimal manner and enable us to build a true Nordic regional champion," added Vehvilainen.
Completion of the agreement is expected four week from the signature. Flybe will have three members of the Flybe Nordic board and Finnair will have two.