Report: United Airlines, Continental agree to merge

The deal, valued at nearly $3.2 billion, would create the world's largest airlines, the New York Times quoted sources close to the companies as saying. The boards of both companies approved the all-stock transaction on Sunday afternoon, the sources said.

Under the terms of the transaction, United is expected to issue to Continental shareholders 1.05 of its shares for each of their Continental shares.

The combined company will keep the United name and will be based in United's hometown of Chicago, and run by Continental CEO Jeffery Smisek. United CEO Glenn Tilton will be chairman, the report said.

Continental and the Chicago-based United came very close to a merger in 2008, but their talks were suspended at the direction of Continental's board and Continental chose to pursue an alliance instead.

Before its latest talks with Continental over a merger deal, United also reportedly had talks with Arizona-based US Airways.

Observers say Continental would be a better choice for United since their tie-up would form the world's largest airline, with relatively little overlap in their networks; Kazinform cites China Daily.

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