British Airways and Spanish carrier Iberia have signed a deal to merge but still need shareholders and regulators to give them the green light.
The long awaited merger, which was provisionally agreed in November last year, will create the world’s third largest airline by revenue with a combined market value of around £5.1 billion.
This will have 408 aircraft flying to 200 destinations and carrying more than 58 million passengers per year.
The deal, which is expected to be completed by the end of the year, is estimated to save the two companies £350 million a year in costs.
However, there have been concerns that the deal will disadvantage consumers, with Virgin's Richard Branson describing it as a "kick in the teeth".
Willie Walsh, chief executive of British Airways, says: "The merged company will provide customers with a larger combined network. It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services."
The group will operate under the banner of International Airlines Group, but the British Airways and Iberia brands will continue to operate as normal. British Airways shareholders retain 55% ownership of the company.
As outlined in the memorandum of understanding, British Airways shareholders will receive one new ordinary share in International Airlines Group for every existing ordinary share they hold while Iberia shareholders will receive 1.0205 new ordinary shares for every one they already have.
International Airlines Group will have a premium listing in the UK and its shares will be traded on the main market of the London Stock Exchange.
The completion of the merger is subject to approval from authorities including the European Commission. British Airways and Iberia shareholders must also give the go-ahead.
However, British Airways pension pot could yet prove a sticking point. Iberia can potentially terminate the merger agreement if the pension recovery plan agreed between the airline and its pension trustees does not come up to scratch.
The pension deficit has swelled to £3.7 billion - above the £3 billion level at which Iberia can pull out.