NEW YORK (CNNMoney.com) --
UAL Corp.'s United Airlines announced on Monday it will merge with Continental Airlines in a deal worth $3 billion, creating the world's largest airline.
The combined company, which will fly under the United moniker and Continental logo, is now larger than Delta Air Lines (DAL, Fortune 500), which became the country's largest airline when it merged with Northwest Airlines in 2008. It is expected to serve more than 144 million passengers per year and fly to 370 destinations in 59 countries.
"This combination will provide a strong platform for sustainable, long-term value for shareholders, opportunities for employees, and more and better scheduled service and destinations for customers," said Glenn Tilton, chairman, chief executive of UAL Corp., in a statement.
Under the terms of the deal, Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own, the companies said in a statement.
United shareholders would own approximately 55% of the combined company and Continental shareholders would own approximately 45%.
As a result of the merger, the companies expect to have annual revenues of $29 billion and save between $1 billion and $1.2 billion over the next three years.
United and Continental discussed combining in 2008 and Houston-based Continental backed out. United boasts a stronger financial position this time around though.
Last week, the Chicago-based company reported a first-quarter loss of $82 million, much narrower than the $382 million loss posted a year earlier. And revenue jumped 15% to $4.2 billion.
Thanks to an improved financial performance, United was expected to have more weight in the talks. Last weekend, the company pushed to base the deal on the closing price of its shares the day before an agreement is signed.
Assuming the deal clears anti-trust hurdles, the combined airline would be based in Chicago and use the United name but would be run by Continental chief executive Jeff Smisek, the source said.
Last month, United also discussed the possibility of merging with he Phoenix-based US Airways (LCC, Fortune 500).
Shares of UAL (UAUA, Fortune 500) were unchanged Friday while Continental's (CAL, Fortune 500) stock fell 1.5% Friday.