Ending a yearlong courtship by US Airways, American Airlines agreed Wednesday to merge with the smaller carrier, paving the way for creation of the nation's largest airline.
The boards of both companies met separately to approve the combination, according to two people with knowledge of the vote. A merger would bolster American's domestic footprint, strengthen its presence in the Northeast and give it a bigger network to attract business travelers and corporate accounts.
The merger, the details of which will be announced this morning, would create a rival with the size and breadth to compete against United Airlines and Delta Air Lines, which have both grown through mergers of their own in recent years and are currently the biggest.
But while United and Delta went through bankruptcy filings and mergers over the past decade, American has been steadily losing ground while racking up more than $12 billion in losses since 2001. It was the last major airline to seek court protection to restructure its business with a bankruptcy filing in November 2011.
The wave of big mergers has created healthier and more profitable airlines that are now better able to invest in new planes and products, including Wi-Fi, individual entertainment screens and more comfortable seats for business passengers.
But some consumer advocates said they worried that reducing the number of airlines would lead to higher fares over the long run and allow airlines to increase revenue by imposing new or higher fees.
The deal, finalized in recent days, could be formalized as American exits bankruptcy protection. W. Douglas Parker, the chairman and chief executive of US Airways, will take over as American's new chief executive. Thomas W. Horton, American's current chairman and chief executive, will be chairman, although his tenure could be limited.
The merger still needs to pass several steps. It must be approved by American's bankruptcy judge in New York. US Airways shareholders, who will also have to approve the deal, would hold 28 percent of the combined carrier.
In addition, it will be reviewed by the Department of Justice's antitrust division, although analysts expect regulators to clear the deal.
If the deal is approved, the nation's top four airlines American, United, Delta and Southwest would control nearly 70 percent of the domestic market.
The merger is a victory for Parker. Over the past year, he convinced American's creditors that the carrier needed to expand its network to compete. In April, he won the critical backing of American's three labor groups, which defied American's management and publicly endorsed a deal with US Airways.
The biggest challenge for the merged company, which will be called American Airlines, will be to integrate operations over the next couple of years. That is no easy task since airline mergers are often rocky involving complex technological systems, big reservation networks and large labor groups with different corporate cultures that all need to be combined.
United angered passengers last year after a series of merger-related computer and reservation mistakes and late and delayed flights.
Parker has done this before. In 2005, when he was the head of America West, he engineered a merger with the larger US Airways.
In this case, the merged American Airlines will still be based in Fort Worth, Texas, and have 94,000 employees, 950 planes, 6,500 daily flights, eight major hubs and total sales of nearly $39 billion.
It would be the market leader for the East Coast, the Southwest and South America. It would remain a smaller player in Europe, where United and Delta are stronger, and do little to bolster the presence in Asia, where it trails far behind its rivals.
American has major hubs in Dallas, Miami, Chicago, Los Angeles and New York. US Airways has hubs in Phoenix, Philadelphia and Charlotte, N.C., and has a big presence at Ronald Reagan National Airport in Washington.
Despite the increased concentration, consumers can still expect to find vibrant competition, said William S. Swelbar, a research engineer at the Massachusetts Institute of Technology's International Center for Air Transportation.
"We will have four very big, very vigorous competitors in the market," he said.
Travelers are better served by bigger airlines offering more connecting flights and more destinations, analysts said. Consumers today can easily compare fares and shop for the cheapest flight online, which keeps airfares in check.
But Kevin Mitchell, chairman of the Business Travel Coalition, disagreed. He said that consumers would see few benefits to offset the merger's negative impact.