US Airways Group Inc. (search) and America West Holdings Corp. (search), the nation's seventh-and eighth-largest carriers, on Thursday announced their merger, in a move that they hope unite two struggling carriers into a bigger, stronger one.

The merged company will be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

The goal of the merger is to stitch together two geographically distinct carriers with a history of financial struggles into a stronger airline that would compete better with lower-cost rivals such as Southwest Airlines Inc. (LUV) and JetBlue Airways Corp. (JBLU).

The new, combined carrier will operate as US Airways.

"Building upon two complementary networks with similar fleets, closely aligned laarker, chief executive and president of America West Holdings Corp., America West's parent company. "Through this combination, we are seizing the opportunity to strengthen our business rather than waiting for the industry environment to improve."

US Airways President and CEO Bruce Lakefield said the merger will accomplish the objective of ensuring US Airways' long-term viability and security of its employees.

US Airways Group Inc., which last year made its second trip into bankruptcy in two years, used the bankruptcy process to slash worker pay by $1 billion a year and shed $3 billion in pension obligations. But even after the cost reductions, the airline continued to struggle as fuel costs soared and low-fare competitors continued to drive ticket prices down.

America West, which was founded in 1983 and is based in Tempe, Ariz., operates flights across the country through its hubs in Phoenix and Las Vegas.

The company was pushed to the brink of bankruptcy shortly after the Sept. 11 terrorist attacks and secured a $429 million loan guarantee from the federal government. The guarantee allowed America West to avoid Chapter 11 bankruptcy, a move the airline might not have survived.

Its service record has since improved. In July 2003, the company reported its first of several quarters of profits after more than two years of losses. Its earnings have since have been mixed, due largely to high fuel costs and too many cheap fares in the market.

Reuters and the Associated Press contributed to this report.