US Airways and American Airlines parent AMR could be a step closer to a merger after the companies entered into a nondisclosure agreement.

Under the terms of the agreement, both companies have agreed to exchange certain confidential information and to work in good faith to evaluate a potential combination, according to a memo from US Airways chief executive Doug Parker.

“This agreement will likely remain in place until either a deal has been signed or we have determined this process will not result in a transaction,” Parker told employees in the memo.

“As a result, we will not be able to be as open and candid about the discussions with American as we usually are about issues that are important to all of us.”

If the merger becomes a reality, the combined airline would have a complementary route network and be able to compete with the largest carriers including United Continental Holdings.

American Airlines has also recently strengthen its position in Europe, moving closer to oneworld partners British Airways and Iberia.