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.

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.

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.

Investing.com-- Brazilian airline Azul SA (NYSE: AZUL) and Abra- the majority investor in its rival Gol, said they had signed a non-binding agreement on Wednesday to explore the combination of their businesses in Brazil.