US airlines United and Continental on Monday announced a “merger of equals,” which is set to create the world’s largest airline.

Falling passenger numbers, high fuel prices and intense competition in the economic crisis have spurred on the move.

Continental boss Glenn Tilton, who will become non-executive chair of the new company’s board, said the merger would “create a world-class and truly global airline ... better positioned to succeed in a dynamic and highly competitive global aviation industry.” Continental shareholders are to receive 1.05 shares of United common stock for each of their Continental common shares. United shareholder would then own 55 per cent of the new company, Continental shareholders around 45 per cent.

The holding company for the new airline is to be called United Continental Holdings. The airline itself will go under the name of United and feature Continental’s logo.

Jeff Smisek, Continental’s chairman, is set to become chief executive officer.

“This combination brings together the best of both organizations and cultures to create a world class airline,” Smisek said.

“Together we have the financial strength necessary to make critical investments to continue to improve our products and services and to achieve and sustain profitability,” he continued.

The merger was approved unanimously by both boards of directors but was still dependent on shareholder and regulatory approval. The airlines expected the deal to be complete by the end of 2010.

The two airlines fly over 144 million passengers a year to 370 destinations in 59 countries.

More In: Companies | Business