Delta and Northwest airlines announced a merger late Monday after months of talks, agreeing to a stock swap that would create the world's largest passenger carrier.

"Delta and Northwest are a perfect fit," Delta chief executive Richard Anderson said in a statement announcing the merger, which comes amid soaring fuel costs that are battering the airline industry.

Northwest Airlines stockholders will receive 1.25 Delta Air Lines shares for each Northwest share, a premium of nearly 17 percent based on share prices at the close of trading Monday.

The larger of the two airlines, Delta will essentially absorb Northwest. The combined airline will be known as Delta, and the headquarters will be in Atlanta, Delta's long-time base.

Anderson will remain and chief executive of the combined airline, and Chairman Daniel Carp will hold the same position in the enlarged Delta. Northwest Chairman Roy Bostock will be the new vice chairman of Delta's board.

The new airline will have a fleet of nearly 800 aircraft with 75,000 employees and annual revenues of $35 billion.

The merger still requires the agreement of shareholders for both companies and government regulatory approval.