An agreement has been reached by the boards of both Continental Airlines and United Airlines which could see the emergence of the largest carrier in the world. The decision to merge the two airlines is expected to be passed by shareholders as well as regulators by the end of the year.

Although the deal had been frustrated recently because of a disagreement over share values, it seems that both boards are now unanimous in their decision. Glen Tinton, United’s boss, will become chairman of the new airline, which will operate under the name United (although the colours will now be those of Continental). Jeff Smisnek, Continental’s boss, will become chief executive of the newly created giant.

Senior management will be chosen in equal numbers from executives currently at both airlines, and the board of directors will also take its membership from the independent directors currently working for the companies. Two of the sixteen seats will go to the unions. United will keep its headquarters in Chicago, but the largest operation will be run out of Houston, the home of Continental.

Mr Smisnek said that the merger had come out of the respect both airlines had for each other whilst members of the Star Alliance Partnership. He also said that he believed that together, United and Continental had the financial clout to make the necessary investments to drive forward profitability.

Both Continental and United were forced to cut capacity during the global economic downturn and reported large financial losses. The boards of both companies hope that a merger will usher in a new age of expansion and profitability.