Continental Airlines and United Airlines have announced a definitive merger agreement, creating the world’s largest airline.

Following an all-stock merger, the new body will offer a global network serving 370 destinations, with the deal designed to reposition the new company in the competitive global aviation industry.

UAL president Glenn Tilton will serve as non-executive chairman of the combined company’s Board of Directors until December 31st, 2012 or the second anniversary of closing, whichever is later.

Jeff Smisek, Continental’ president, will be chief executive officer and a member of the Board of Directors. He will also become executive chairman of the Board upon Tilton’s ceasing to be non-executive chairman.

The combined company’s management team is expected to include an equitable and balanced selection of executives from each company with the intention that each company will contribute roughly equal numbers.

In addition to Mr Smisek and Mr Tilton, the 16-member Board of Directors will include six independent directors from each of the two companies and two union directors required by United’s charter.

Following the deal Mr Tilton said, “Today is a great day for our customers, our employees, our shareholders and our communities as we bring together our two companies in a merger of equals to create a world-class and truly global airline with an unparalleled network serving communities worldwide with outstanding customer service.

“Building on our Star Alliance partnership, we are creating a stronger, more efficient airline, both operationally and financially, better positioned to succeed in a dynamic and highly competitive global aviation industry.”

The holding company for the new entity will be named United Continental Holdings, Inc. and the name of the airline will be United Airlines.

The marketing brand will be a combination of the brands of both companies.

The new company’s corporate and operational headquarters will be in Chicago and it will maintain a significant presence in Houston, which will be the combined company’s largest hub.

Mr Smisek added: “This combination brings together the best of both organisations and cultures to create a world-class airline with tremendous and enduring strengths.

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

On a pro forma basis, the combined company would have annual revenues of approximately $29 billion based on 2009 financial results, and an unrestricted cash balance of approximately $7.4 billion as of the end of first quarter 2010, including United’s recently closed financing transaction.