Terms of the deal would provide AMR stakeholders with 72% of the combined equity, with US Airways holders owning 28% of the common stock. Based on US Airways Feb. 13 stock price the airline would have an implied equity value of about $11 billion. AMR, which is operating in bankruptcy, said its equity would be distributed among debtors, employees and pre-bankruptcy equity holders, who will receive 3.5% of the company's stock.

The combination will keep the American Airlines name and AMR's Fort Worth, Texas, headquarters, with US Airways head Doug Parker serving as CEO and AMR CEO Tom Horton appointed non-executive chairman.

The combination would have nearly $40 billion in pro forma annual revenue, placing it slightly ahead of industry leaders United Continental Holdings Inc. and Delta Air Lines Inc., and substantial operations in markets including Dallas, Miami, Chicago, Los Angeles, Charlotte, Washington, Philadelphia and New York. The airlines said to expect one-time merger costs of $1.2 billion spread over three years, and pledged to generate more than $1 billion in synergies by 2015.

Parker in a statement said "today marks an exciting new chapter for American Airlines and US Airways," saying the combined airline would be able to better compete than either could on its own.

"The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace," Parker said. "Our combined network will provide a significantly more attractive offering to customers, ensuring that we are always able to take them where they want to travel, when they want to go."

Merging American and US Airways will create a more formidable competitor, but analysts said it could also have a positive impact on the entire industry by continuing the trend towards fewer flights.

"We believe consolidation has been an unequivocal positive for the industry," Barclays analyst David E. Fintzen wrote Wednesday. The industry's recent discipline of chasing profits instead of marketshare has had a positive impact, the analyst wrote, and "past M&A has reinforced, if not expanded, capacity discipline as the industry works to earn its cost of capital sustainably."

The deal is also a capstone transaction for Parker, one of the industry's most outspoken advocates of consolidation for more than a decade. Parker took the helm at America West Airlines Inc. in September 2001, just as the industry was shaken by the attacks of Sept. 11, and has used M&A to build that tiny discounter into the world's largest carrier.

Parker's America West bought US Airways out of bankruptcy in 2005 and the merged company, which kept the target's name, in 2007 made an unsolicited bid to acquire Delta out of bankruptcy. The company also held talks with United Airlines Inc. parent UAL Corp., which spurned US Airways in favor of merging with Continental Airlines Inc.

US Airways management applied what they learned in those attempts to court American, starting a process soon after AMR's November 2011 bankruptcy filing. Significantly, US Airways reached out to American labor groups and creditors to build support for a deal.

AMR was advised by Rothschild, Weil, Gotshal & Manges LLP, Jones Day, Paul Hastings, Debevoise & Plimpton LLP and K&L Gates LLP. Barclays and Millstein & Co. are serving as financial advisers to US Airways, with Latham & Watkins LLP, O'Melveny & Myers, Cadwalader, Wickersham & Taft LLP, and Dechert LLP providing legal counsel. Moelis & Co. and Mesirow Financial are financial advisers to the unsecured creditors committee, with Skadden, Arps, Slate, Meagher & Flom LLP and Togut, Segal & Segal LLP providing legal counsel to that group.