RIO DE JANEIRO (AP) — Brazil’s TAM Airlines and LAN of Chile announced plans Friday for a merger that would create Latin America’s largest airline.

The two airlines — both the biggest in their respective nations — said their memorandum of understanding was nonbinding, with approval needed from shareholders of both companies and regulatory agencies.

They said the two airlines would retain their individual identities, with TAM’s headquarters remaining in Sao Paulo and LAN’s in Santiago, Chile.

“The group would be among the leading airline groups in the world in terms of size, profitability and market reach,” the companies said in a joint statement.

The merged company, to be known as LATAM Airlines Group, would include LAN and its affiliates in Peru, Argentina and Ecuador; Lan Cargo and its affiliates; TAM Lineas Aereas SA; TAM Mercosur and all other holdings of LAN and TAM.

The airlines said the combined airline group would provide passenger services to more than 115 destinations in 23 countries. The airlines of the group would operate a fleet of more than 220 aircraft and have more than 40,000 employees.

Last year, the carriers had combined revenues of US$8.5 billion, carried more than 45 million passengers and transported 832,000 tons of cargo.

The statement said LAN Airlines SA would be renamed LATAM Airlines Group SA and absorb TAM. TAM’s shareholders would be offered 0.90 share of common stock of LATAM for each share of TAM.

Under the deal, TAM would continue to operate as a Brazilian company with its own structure. The current holdings of LAN Airlines SA would operate as an independent business unit within the group — and be referred to as LAN Airlines.

Mauricio Rolim Amaro, currently vice chairman of the board of directors at TAM, would be chairman of the board of directors of LATAM. Enrique Cueto, currently CEO of LAN, would serve as LATAM’s chief executive, the statement said.

“Together, LAN and TAM will be able to offer new destinations that neither company could have supported on its own,” said Marco Bologna, CEO of TAM. “This will position us to compete with the foreign carriers that continue to increase service to our region, while creating new jobs in our home countries.”