The World’s Largest Airline Is Almost Here

American AirlinesAfter months of discusssions between U.S. Airways (NYSE:LCC) and AMR (PINK:AAMRQ), the bankrupt parent of American Airlines, the companies are reportedly nearing a merger deal. The news sent shares of U.S. Airways up about 5% in Thursday morning trading.

Under an agreement still being finalized, the all-stock combination would be structured as a reorganization. U.S. Airways CEO Doug Parker would likely head the merged airline, which will retain the American Airlines name. American, which would become the world’s largest airline in terms of traffic, would emerge from Chapter 11 bankruptcy with a market value of $10 billion, The Wall Street Journal noted.

Creditors of American Airlines would end up owning about 72% of the combined airline. Shareholders of U.S. Airways would hold the remaining stake. However, details about the ownership split are still under negotiation, and the terms of the deal haven’t been presented to either company’s board, raising the possibility that the agreement could still unravel.

In August, American and U.S. Airways agreed to open their books for mutual inspection, which signaled to many investors that merger negotiations between the two airlines were progressing steadily.

Struggling American had long hinted that it was looking for a merger partner. Other potential suitors were rumored to include JetBlue (NASDAQ:JBLU), Alaska Air Group (NYSE:ALK), Virgin America and Republic Airways’ (NASDAQ:RJET) Frontier Airlines.

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