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NEW YORK (CNNMoney.com) -- UAL Corp.'s United Airlines will announce a deal to merge with Continental Airlines for more than $3 billion on Monday, a source familiar with the situation said Sunday.

The board of directors at both airlines approved the deal Sunday. The deal will be a merger of equals, valuing Continental at around its current market capitalization of $3.1 billion, the source said.

merger between the two would create the world's largest airline, overtaking Delta Air Lines (DAL, Fortune 500), which merged with Northwest Airlines in 2008.

Representatives from United and Continental would not comment about merger speculation, which was first reported by the Wall Street Journal.

United and Continental discussed combining in 2008 and Houston-based Continental backed out. United boasts a stronger financial position this time around though.

Last week, the Chicago-based company reported a first-quarter loss of $82 million, much narrower than the $382 million loss posted a year earlier. And revenue jumped 15% to $4.2 billion.

Thanks to an improved financial performance, United was expected to have more weight in the talks. Last weekend, the company pushed to base the deal on the closing price of its shares the day before an agreement is signed.

Assuming the deal clears anti-trust hurdles, the combined airline would be based in Chicago and use the United name but would be run by Continental chief executive Jeff Smisek, the source said.

Last month, United also discussed the possibility of merging with he Phoenix-based US Airways (LCC, Fortune 500).

Shares of UAL (UAUA, Fortune 500) were unchanged Friday while Continental's (CAL, Fortune 500) stock fell 1.5% Friday.

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