Brazilian carrier Azul SA and the principal shareholder for rival Gol Linhas Aereas Inteligentes SA reached an agreement to work toward a merger, potentially creating one of the largest airlines in Latin America.

Brazil airlines Azul and GOL are set for merger talks which could create the dominant player in aviation in the country. They signed a MoU after getting tentative approval from Brazilian President Lula da Silva. The plan is to combine the businesses of Azul and GOL parent Abra. It would give the new business a 60% share of the aviation market.

Abra—which also controls Colombia’s flag carrier Avianca—and Azul concluded the two Brazilian airlines have 90% complimentary and non-overlapping routes. Last year, amid reports that Azul was interested in merging with its rival GOL, the airlines launched a domestic codeshare.

Gol and Azul propose to maintain separate brands while coordinating their finances, networks and product offerings.

Brazilian carriers Azul and GOL have agreed to enter merger talks in a deal that could create Brazil’s largest airline group.

Abra Group and Brazilian carrier Azul have entered a memorandum of understanding to explore a combination that would create Brazil's largest airline via a tie-up with Gol.

Azul and Gol , two of Brazil's largest airlines, are moving a step closer to a sweeping merger that would create a dominant carrier in Latin America's No. 1 economy, a securities filing showed on Wednesday.