People with knowledge of the situation said that United Airlines parent UAL Corp. and Continental Airlines Inc. agreed to merge in a stock swap valued at $3.7 billion that would create the world’s biggest carrier.

The people, who asked not to be identified because the terms aren’t public yet, said that the airlines’ boards approved the transaction Sunday, and the deal will be announced Monday. One person said that their combined equity value would be about $8.3 billion.

United and Continental together would take the top spot in global traffic from Delta Air Lines Inc., have New York and Washington hubs, and be the busiest US carrier on the high-fare routes across the Atlantic and Pacific. The person said that annual cost savings and new revenue should reach $1 billion to $1.2 billion by 2013.

Ray Neidl, an independent airline analyst based in New York, said, “These two companies coming together was kismet.” He added, “It was destined to happen because this creates truly a worldwide system. They need the market size to effectively compete” with Delta.

(article source: Businessweek, photo source: NJ.com)