The airline is expected to consist of a modest fleet of 20 and 50-seat fixed-wing aircraft and helicopters.
The Palestinians wanted to use Jerusalem's Atarot Airport for direct flights linking the tourist sites of self-ruled Jericho to Cairo and Amman. International Air Transport Association (Iata) officials acted as a go-between, before the Paris accord was signed, but the request was turned down by Israel's Civil Aviation Administration (ICAA).
An agreement that also involves Jordan is essential, say Iata sources, because daily flights from Gaza to Amman will cross airspace of Jordan and Israel which is currently closed to each others' flights.
Sources say a helicopter shuttle service between Jericho and Gaza is planned, which in turn will be linked by daily flights to Cairo and Amman.
At present Egyptair is the only Arab airline flying to Israel, and Israel's El Al serves Egypt.
Scores of Palestinian pilots and other air crew, currently serving in a number of Arab airlines, have expressed an interest in joining the new venture.
A number of PLO pilots have been flying in Africa with the flag carrier of Guinea-Bissau since the mid-1980s, under an agreement on the supply of Palestinian crews brokered by the Libyans.
No name has been chosen yet for the airline.