British Airways has signed a tie-up deal with American Airlines and Iberia to merge their transatlantic operations.

The airlines still need formal approval from US and European competition authorities to go ahead with the merger.

Under the agreement, the airlines would co-operate commercially on flights between Europe and North America but still operate as separate legal entities.

In a joint statement, the airlines say the new agreement would provide greater access to discounted fares, a timetable which allows easier connections and “greater ability to withstand the current industry crisis”.

There is no reason why fares should rise if the agreement is approved, they claim.

The airlines plan to file today for worldwide anti-trust immunity from the US Department of Transportation. Two previous attempts by British Airways and American Airlines have been blocked by competition authorities.

British Airways chief executive Willie Walsh said: “This strategic relationship strengthens competition by providing consumers with easier journeys to more destinations with better aligned schedules and frequencies.”

The alliance has been opposed by Virgin Atlantic. Sir Richard Branson said: “If this monster monopoly is approved it will be third time unlucky for consumers. It will still be bad for passengers, bad for competition and bad for the UK and US aviation industry. The current economic slowdown is also no justification for agreeing to this alliance.”