By taking on the most lacklustre asset in the British Airways empire, BA Connect, Exeter-based Flybe faces a tough turnaround task but has also become a major player in the European regional airline market.

The budget airline expects its low-cost approach to wring profits from an operation that has dumped mounting losses on the BA balance sheet.

Flybe was formerly owned by the late steel tycoon Jack Walker and is now controlled by The Walker Trust.

It appears to run a leaner operation than its larger rival, carrying nearly twice as many passengers with 100 fewer staff than BA Connect, which employs 1,900 staff.

Today's deal comes as Flybe had been preparing to float on the stock market next year to raise funds for an £800m expansion of its fleet.

However, today it said the float plans have been put back until the first half of 2008.

Following the BA Connect acquisition, Flybe will carry 10 million passengers a year to 159 routes, generating revenues of around £600m.

Aer Lingus, the Irish national flag carrier has proven that there is investor appetite for airline stocks by pulling off a flotation last month.

Its share price has subsequently rocketed after Ryanair launched a hostile takeover bid - a move that Flybe could expect once it floats, if not from Ryanair then from another low cost operator.

Jim French, chairman and chief executive of Flybe, hinted today that The Walker Trust, which controls more than 50% of the airline, is in no mood to sell.

"Through this acquisition we are seeking to build a bigger, stronger and even more defensible Flybe," he said in a statement.

"The Flybe business model concentrates on domestic and European city markets and has been incredibly successful over the last 4 years. This acquisition will allow us to bring our growth plans forward by two years."

In the six months to September 30, Flybe reported an operating profit of £20.5m, against £12.4m in the same period last year.

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