Channel islands carrier Blue Islands plans to take over many former Flybe routes after a £10 million state loan was agreed.
Jersey’s government is to loan the airline the cash which will need to be repaid over six years.
The money will be used to maintain links between the island and the UK and enable Blue Islands to take over many of lost routes following the collapse of Flybe in March.
The airline will move its operating base to Jersey airport as its base carrier.
Jersey airport was left with three main airlines – British Airways, easyJet and Blue Islands – following the Flybe failure.
EasyJet and BA have received UK government-backed loans of £600 million and £300 million respectively to counteract the Covid-19 travel downturn.
States of Jersey treasury and resources minister Susie Pinel said: “Blue Islands serves the smaller, regional UK airports that either cannot accommodate larger planes or are not commercially viable for the larger aircraft used by easyJet and British Airways.
“This financial support will ensure resilience for our connectivity, maintaining access to essential medical care, education and connections with friends and family.
“This loan will also offer opportunities to develop more direct routes into European countries, and it provides an alternative to the larger airlines, for whom Jersey is a small operation.”
Blue Islands chief executive Rob Vernon said: “This unique combination provides a strong platform to provide vital connectivity for islanders and will play a key role in the recovery of the island’s economy.
“Our focus is now to deliver sustainable, high-frequency, year-round regional services for many years to come. We recognise the important strategic role we need to play in Jersey’s recovery plans.”