Air Berlin, currently Europe's third-place discount carrier, said it will pay a "mid-double-digit million" euro amount for rival DBA, adding that the purchase will not burden its annual earnings. On the contrary, the company expects to post "a significant profit" this year, according to Chief Executive Officer Joachim Hunold.

"Air Berlin and DBA's route network compliment each other beautifully because there is no overlap," Hunold said. "We can integrate DBA's German inland flights into our European network without any problem and therefore significantly boost the number of business travellers."

The purchase means that Air Berlin will gain access to DBA's airport slots in key German business destinations Munich and Düsseldorf.

"We couldn't pass up the opportunity to acquire our dream partner," Hunold said.

DBA will continue to operate as an independent company, though it will be re-branded as Air Berlin, "powered by dba."

Hunold said he believes synergies will arise from joint purchasing, yield management and logistics, but did not elaborate further.

Challenging Lufthansa?

The deal is fuelling speculation that Air Berlin is preparing to challenge German flagship carrier Lufthansa for the top position in the domestic market. Should the company indeed give Lufthansa a run for its money, passengers would likely reap the benefits of an aggressive price war on flights within Germany.

Air Berlin on Thursday reported second-quarter net income of 30.1 million euros ($38.7 million) after a loss of 4.2 million euros a year ago, the company said. Revenue rose 22 percent to 401 million euros.

In initial trading in Frankfurt on Thursday, shares of Air Berlin rose as much as 95 cents, or 9.6 percent, to 10.85 euros, the biggest increase ever. Shares had been down 18 percent from the initial sale price of 12 euros.