American Airlines, British Airways and Spanish flag-carrier Iberia have signed a long-awaited strategic alliance that will see them cooperate on flights between Europe and North America.

The deal – worth approximately £4.4 billion annually – will see the airlines share passengers and costs on flights between the European Union, Switzerland, Norway, Canada, Mexico and the United States.

In a statement British Airways said: “This will enable the airlines’ alliance Oneworld to compete on an equal footing with the other main global alliances that have had regulatory approval to operate transatlantic joint businesses for several years.”

The proposed tie-up between the airlines received regulatory approval from the European Union and United States earlier this summer.

The deal had been vigorously opposed by transatlantic rival Virgin Atlantic, which claimed it would create a “monster monopoly”.

The agreement will launch in October.

International Airlines Group

British Airways and Iberia are presently in the midst of an $8 billion merger, which is now expected to complete in December.

Under the terms of the deal both airlines will fall under the umbrella of a new holding company - International Airlines Group – with BA chief executive Willie Walsh at the helm.

The board of the new company – set to become the world’s third biggest airline - was confirmed earlier this week.

Following completion of the deal IAG is expected to explore further acquisition options, with a deal with American Airlines a priority.