Jet Airways (India) Ltd and Air Sahara signed a deal - the biggest in India's aviation history - late on Wednesday, paving the way for a strategic alliance between the two carriers initially and a full fledged merger eventually, a Jet official said.
The official on Thursday asked not be named because the company, which is listed on the Bombay Stock Exchange, would make a formal announcement after informing the exchange.
The deal signed by the top management of the two companies was to be ratified by the Jet's board of directors later Thursday, she said.
The merged entity will have share of more than 50% in India's aviation market.
In 2005, Jet overtook state-owned Indian airlines in flying the most passengers. With the acquisition of Sahara, it will also now have the largest fleet of aircraft.
Jet flew nine million passengers last year, up 14% from the previous year, while Indian airlines carried 8.7 million people in 2005, up 3.5% on year. Sahara flew 3.5 million.
India's aviation sector has experienced robust growth in recent years after being opened up to private carriers as part of a broader government liberalisation programme began in the early 1990s.
The competition has brought down fares and in the process attracting more passengers. Aviation officials expect the number of fliers to grow from around the current 20 million a year to some 50 million in 2010.