Flybe, a major operator out of Birmingham Airport, has agreed a franchise deal with Scottish counterpart Loganair.

Loganair will carry Flybe colours from October 26 once its current deal with British Airways ends.

The agreement - claimed to be the first of its kind ever for a low cost carrier - is part of Flybe's ambition to build a market-leading position as Europe's largest regional airline following last year's acquisition of BA Connect.

Flybe said it was also evidence of its commitment to building a significant presence in the Scottish market and to expanding its route network there.

It would extend Flybe's low-fare model throughout the UK - including the Highlands and Islands - which have not previously benefited from low cost airlines.

Flybe chairman and chief executive Jim French said: "This landmark agreement, the first time a low-cost carrier has entered into such a franchise arrangement, is an exciting development in the evolution of the low cost model and one which Flybe sees as a valid strategic option for the future. This is a win-win for both airlines.

"For Flybe, we will see our presence in the key Scottish market greatly enhanced and will benefit from increased passenger traffic into our existing network. For Loganair, the alliance is a major opportunity to bring the recognised brand of Europe's largest regional airline and the benefits of the low cost model to over half a million passengers."

Loganair's chairman Scott Grier said: "This is an exciting time for everyone at Loganair and a significant step for the company. The move to become a franchise partner with Flybe provides certainty and removes speculation about the future of the company. We continue to be committed to operating throughout the Highlands and Islands and this will benefit our customers with a greater choice of connections to UK and European destinations."

Flybe claims to be Europe's largest regional airline with 162 routes, operating from a total of 53 departure points, 23 UK and 30 European airports.

It is the largest scheduled airline at Birmingham, Exeter, Manchester, Southampton, the Channel Islands, the Isle of Man and Belfast City.