Greek carrier Olympic Air has agreed to merge with its local rival Aegean Airlines.
The two carriers disclosed recently that they were in talks over a possible co-operation but did not detail the potential extent.
Aegean Airlines says the main shareholders of the two operators have reached an agreement to merge and form a new company which will bear the Olympic Air name and brand.
The company will be listed on the Athens stock exchange.
Olympic's engineering and ground-handling divisions will become subsidiaries of the merged operation.