Joao Lopes, easyJet's executive director in Portugal, told reporters the airline would allocate three aircraft to Faro next year, making it the company's third base in the southern European nation. It already has bases in Lisbon and Porto.
EasyJet hopes to operate 17 international routes to and from Faro between March and October 2021.
Lopes said easyJet wanted to "be able to react as soon as the recovery starts (...) and reinforce tourism in Algarve", a region well known among British tourists for its beaches and golf courses.
Last year, Portugal received about two million Britons, with 64% of them going to the sunny Algarve. So far in 2020, only about 100,000 Britons have arrived in the region.
EasyJet has been badly hit by the pandemic, warning on Thursday its first ever annual loss could be as much as 845 million pounds as it was flying just 25% of planned capacity.
Lopes said the new base in Faro would create around 100 local jobs.
"We want to avoid 2021 being a year of losses, as 2020 was, and it may be the first year of recovery," Lopes said. Economy Minister Pedro Siza Vieira said easyJet's investment in Faro was important, especially "at a time air transport is going through the greatest crisis in history".
(Reporting by Sergio Goncalves; Editing by Catarina Demony and Mark Potter)
By Sergio Goncalves