signed an agreement to merge with Spain's
, creating Europe's third-biggest airline and sixth-largest worldwide.
The carriers expect the merger to be completed by the end of the year. British Airways and Iberia signed a provisional agreement to merge in November.
The merged carrier will be known as International Airlines Group. Both companies will continue to operate under their own individual brands.
Synergies from the deal are expected to be 400 million euros ($530 million) a year by the fifth year, the airlines said.
"The merged company will provide customers with a larger combined network," said British Airways CEO Willie Walsh. "It will also have greater potential for further growth by optimizing the dual hubs of London and Madrid and providing continued investment in new products and services."
-- Reported by Joseph Woelfel in New York.
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