The European Commission (EC) has approved the proposed merger between the UK’s British Airways (BA) and Iberia of Spain.
A joining of the two airlines was cleared under the EU Merger Regulation for air passenger and cargo transport, as well as related services.
The EC ruled that the agreement between the companies would not have a significant detrimental effect on competition in any part of the European Economic Area.
BA currently serves 150 cities in 75 countries with a further 215 cities being served through code-sharing relationships, while Iberia operates flights to 110 cities in 43 countries.
The airlines are also pursuing a closer relationship with American Airlines for transatlantic routes, plans for which were rubber stamped by the EC and are awaiting approval from the US Department of Transport (DoT).
Willie Walsh, chief executive of BA, said: "We await the DoT’s final decision but welcome this important and vital step forward. The high number of new services on London to US routes since the Open Skies agreement demonstrates that Heathrow is open."
All three airlines are part of the Oneworld alliance, along with Cathay Pacific, Japan Airlines and Qantas.