The Indian government has approved a plan by Abu Dhabi-based carrier Etihad to buy a 24% stake in Jet Airways for $379m.
The deal is the first foreign investment in India's burgeoning aviation sector since the government raised the foreign ownership threshold to 49% of local airlines.
The move has spurred a number of recent deals including new joint ventures between Singapore Airlines and AirAsia and India's Tata Group.
The Jet-Etihad deal was first revealed earlier this year but has been marred by disagreements between the two carriers about who would control the day-to-day operations of Jet Airways, majority-owned by tycoon Naresh Goyal.
Following the deal, Mr Goal - who lists the tax haven of Isle of Man as his domicile - will own 51% of the airline, Etihad 24% with the public owning the remainder of shares.
The Indian government has forecast that domestic air travel will nearly triple this decade as airlines connect the sub-continent's smaller cities.
However, despite its potential, India's aviation industry has suffered major losses, not least because of high fuel costs and intense price competition.
Only one of India's six main carriers - IndiGo - made a profit last year.
Jet Airways, which flies on both domestic and international routes, has been struggling in recent times, and many analysts have said that the Etihad deal may help turn around its fortunes.BLOG COMMENTS POWERED BY DISQUS