The European Commission has cleared for take-off the three-way transatlantic tie-up between American Airlines, British Airways and Iberia.
The EU Commission said it would grant the airlines immunity from European anti-trust laws that prevent businesses from co-ordinating prices and schedules.
Under the plan, the airlines would share costs, but surrender four transatlantic take-off and landing slots.
However the merger still requires final approval from US Department of Transport.
The airlines are expected to start working together from the autumn, subject to US approval.
“We await the DOT’s final decision, but welcome this important and vital step forward,” said BA chief executive Willie Walsh.
Virgin Atlantic has fiercely opposed the tie-up, describing it as a “monster monopoly”. Its boss, Sir Richard Branson, said consumers would lose out.
“We have fought this monster monopoly for the past 13 years and are still resolute in our belief that this decision is shameful and consumers will suffer greatly as a result of this deal,” he said.
In a further blow to Virgin, EU regulators have also approved BA’s merger with Iberia in a deal that will create Europe’s third-largest carrier, and help both carriers cut costs.
The new company will be called International Airlines Group, but the BA and Iberia brands will continue to operate as normal.
The European Commission said it did not have any anti-competition concerns over the merger because the enlarged airline would continue to face competition from rivals, even on routes such as London-Madrid and London-Barcelona.
When the merger was confirmed, BA said the group would operate 419 aircraft, flying to more than 200 destinations, and carry a total of 62 million passengers a year.