US Airways, the US seventh-largest airline, is merging with the nation’s No.8 America West, creating the sixth-biggest carrier that is expected to meet the competition with low-cost airline companies.

The newly-merged company will receive $1.5bn (£816m) in new capital from different investors, including a loan from Airbus. America West hometown Tempe, Arizona, will be the new location for the company. Douglas Parker, America West chief executive, will be chairman for the new company, and US Airways boss Bruce Lakefield will be vice-chairman.

"A combined US Airways/America West places the new airline in a position of strength and future growth that neither of us could have achieved on our own," said Mr. Parker.

The merger is expected to help both companies overcome financial trouble they are facing recently as US Airways was seeking bankruptcy protection twice within two years. America West posted Q1 profits of $33.6 million, compared a $1.6m loss for the same period in 2004.

US Airways will be the name for the new company. The combined flights will be reduced by about 13%. The move to Tempe is still questionable as the destiny of US Airways’ 1,970 Washington area workers is unknown.

US Airways employs 30,000 people, while America West has 14,000 employees. US Airways is twice the size of America West.

America West, a low-cost carrier, was founded in Tempe in 1983. Today the carrier has 192 airplanes and about 100 nonstop flights from its hubs.