Azul and Gol, two of Brazil's largest airlines, are moving a step closer to a sweeping merger that would create a dominant carrier in Latin America's No. 1 economy, a securities filing showed on Wednesday.

Gol and Azul propose to maintain separate brands while coordinating their finances, networks and product offerings.

Abra Group and Brazilian carrier Azul have entered a memorandum of understanding to explore a combination that would create Brazil's largest airline via a tie-up with Gol.

Abra—which also controls Colombia’s flag carrier Avianca—and Azul concluded the two Brazilian airlines have 90% complimentary and non-overlapping routes. Last year, amid reports that Azul was interested in merging with its rival GOL, the airlines launched a domestic codeshare.

Abra Group (the majority investor of Gol and Avianca) and Azul signed a non-binding Memorandum of Understanding (MoU) today with the intent to explore a combination of their