(CNN) -- British Airways and Spanish carrier Iberia are holding talks with a view to an all-share merger between the two companies.
British Airways said in April that it was also talking with American Airlines.
In a statement on its Web site Tuesday, BA confirmed that the negotiations are supported unanimously by the boards of both companies.
It added that the British Airways and Iberia brands would be retained as part of a combined group.
British Airways' chief executive, Willie Walsh, said: "The aviation landscape is changing and airline consolidation is long overdue.
"The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment.
"We've had a successful relationship with Iberia for a decade and are confident that both companies' shareholders would benefit from the proposed tie-up."
Iberia's chairman and CEO, Fernando Conte, said: "A merger would be good news for our customers and enhance our existing relationship. We've worked together for nearly 10 years and a tie-up would build on that success.
"It would also strengthen the oneworld alliance and further develop Madrid's position as the European gateway to Latin America." CNN's Jim Boulden explains more about the deal »
CNN's aviation correspondent Richard Quest said an Iberia-BA tie-up makes sense for both carriers, with the routes of each airline complementing each other. Iberia is strong in Spain and Latin America and BA is strong in Europe, North America, and Asia.
The two companies are already partners as part of the 10-airline Oneworld alliance.
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