US carriers Delta Air Lines and Northwest Airlines are reported close to agreement on a merger to create the world’s largest airline, despite talks a month ago appearing to flounder.

The carriers are expected to announce the tie-up early this week, with the go-ahead dependent on regulatory approval.

Union opposition, particularly among pilots, appeared to have scuppered a deal that will undoubtedly lead to job losses. But record oil prices and recession in the US have seen carriers cut back domestic schedules and triggered a fresh run of airlines seeking bankruptcy protection.

US carriers only moved into collective profit last year for the first time since the start of the decade.

News of the merger will boost British Airways’ rival Air France-KLM which is a partner of both Delta and Northwest in the SkyTeam alliance. BA’s relationship with long-time US partner American Airlines – currently the biggest US carrier – has been on hold for years following a failure to win anti-trust immunity.