European regional airline CityJet has announced it is to merge with the Spanish carrier Air Nostrum.

The new airline group will have a combined fleet of close to 100 aircraft, and annual revenues around €700m.

The companies say the agreement aims to bring about closer co-operation between the two airlines under the umbrella of a new holding company.

This would see the creation of the largest pan-European regional airline group.

Dublin-based CityJet employs 1,250 people across nine European countries and operates a regional network of services under wet lease contracts with Air France, Brussels Airlines and SAS.

It has a fleet of over 40 aircraft, including 22 new Bombardier CRJ900 regional jets acquired specifically for wet lease services.

Air Nostrum, which employs 1,450 people, is the regional operator for Iberia under a longstanding franchise agreement.

It flies to more than 60 destinations within Europe and Africa, with a fleet of 50 aircraft.

The two airlines are also of very similar age, having been founded in 1993 (CityJet) and 1994 (Air Nostrum).

Pat Byrne, CEO of CityJet, said: "By coming together, we believe we will be in a position to respond to the specific needs of customer airlines through our flexibility in the provision of safe, dependable and quality assured operations.

"Our respective proven capacity and asset management expertise in acquiring aircraft for new wet lease contracts is also a significant added benefit we can provide to our airline customers."

Carlos Bertomeu, president of Air Nostrum, added: "Europe is experiencing substantial expansion of wet lease contracts, otherwise known in North America as Capacity Purchase Agreements, as established airlines pursue a strategy of outsourcing their regional flying programmes.

"By CityJet and Air Nostrum finding a formula for combining their respective resources in terms of aircraft, crew and support services, this will undoubtedly result in a far more comprehensive and cost effective option for leading airlines in Europe to outsource their regional networks with confidence in the strength of this proposed new entity as an ideal partner for such activit".

The deal will be subject to regulatory approvals, but the firms say the preparation of the relevant filings has begun.