Ryanair will be setting up a base in Malta from May, positioning one aircraft at the airport and opening up an additional six routes, increasing the number to 19.
The five-year agreement was a result of the "protracted" negotiations with Ryanair, said Malta Tourism Authority CEO, Joseph Formosa Gauci.
He would not disclose how much the agreement has cost the government and Ryanair said it had invested over $70 million at the airport.
According to the low-cost airline's calculations, passenger movements would grow to 800,000 a year and the base should generate 800 jobs, pumping €200 million into the economy, Ryanair commercial manager Colin Casey said.
The additional low-cost routes include Billund in Denmark, Krakow in Poland, Marseille, Seville, Valencia and Bologna.
The first flight is scheduled for May 18 and Ryanair will be flying to Bologna four times a week, three times to Valencia and two to the remaining destinations, with the Malta-based aircraft flying three times daily.
The opening of the routes was possible due to the Malta base, which meant Ryanair now had the option to fly to the other 151 airports in 26 countries.
Available options to allow expansion were running out, so the next step was to open a base in Malta to be able to fly to destinations that did not have a Ryanair base, Mr Formosa Gauci explained. He gave Valencia as an example. Malta had lost the route when Ryanair closed its base in the Spanish city but it could now start operating again thanks to the Malta base.
Malta's tourism was dependent on accessibility and a balance between low-cost carriers, traditional and charter flights was crucial, Mr Formosa Gauci said.
Malta International Airport's fees had been an issue but Mr Formosa Gauci said the airport had cooperated and contributed to the negotiations.
The routes to new and underserved airports were chosen to offer the least possible impact on Air Malta, he said, assuring that the national carrier would not be negatively hit. Bologna and Marseille, for example, were already served by the national carrier but only in the summer and they had the potential to be year-round routes.
Speaking about the prospects for the low-cost airline, Mr Casey said it was expected to carry 73 million passengers by March 2011, registering continued growth.
Originally, there was talk of basing three aircraft in Malta but economics, availability and the market situation meant only one would be stationed at MIA, Mr Casey said.
To celebrate Ryanair's 41st EU base, a million tickets for the new routes went on sale on www.ryanair.com for €9.99 from midnight yesterday until March 7 for travel in late March and April, excluding Easter week.