IAG, the owner of British Airways is to buy BMI, a struggling British carrier, from Lufthansa.
International Airlines Group, which also owns the Spanish airline Iberia, will pay $US270 million and also lift its share of the slots at Heathrow airport to 53%.
The airlines hope the takeover will be completed in the first three months of next year.
BMI is based in Castle Donington in Leicestershire. It operates flights to Europe, the Middle East and Africa.
It has 8.5% of the landing slots at Heathrow, which are seen as the main attraction of a purchase.
BMI has more than 3600 employees, but reported a £153m loss in the year to 2010. BMI also operates the BMI Baby and BMI Regional brands.
The BBC reports the deal remains subject to clearance by competition agencies.
Lufthansa signed a non-exclusive agreement with IAG in November, but had also been in talks with Virgin Atlantic.
Virgin says the deal is anticompetitive and promises to fight the takeover.