A consortium led by Richard Branson's Virgin Atlantic and Stobart Group has agreed an offer to take control of airline Flybe, valuing it at £2.2 million.

The new company that will also comprise the Stobart Air franchise operation.

The takeover comes less than two months after Flybe put itself up for sale, after it warned over its profits following falling demand and a £29 million hit from rising fuel costs and the weak pound.

Stobart Group walked away from a bid for Flybe in March after the two firms failed to agree terms.

Flybe has 78 planes operating from smaller airports including London City, Southampton and Norwich, and flies to destinations across the UK and Europe.

It carries around eight million passengers a year.

The new deal will see Virgin Atlantic operate the network of regional flights provided by a combination of Flybe and Stobart Air.

It is believed Stobart is contributing the assets of Stobart Air rather than any cash in exchange for its stake.

Warwick Brady, Stobart Group chief executive, said: "The board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in UK regional flying.

"The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets.

"t will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend Airport."

Stobart Group plans to open Carlisle airport to commercial plans this year. Launch dates for the new services, which will fly to Southend, Dublin and Belfast, were postponed last year after a shortage of air traffic controllers.