Brazilian carrier Azul SA and the principal shareholder for rival Gol Linhas Aereas Inteligentes SA reached an agreement to work toward a merger, potentially creating one of the largest airlines in Latin America.

Azul and Abra, the majority investors of airlines Gol and Avianca, on Wednesday said they signed a non-binding Memorandum of Understanding to combine their businesses in Brazil. Azul said the two companies have about 90% complementary and non-overlapping routes.