Japan Airlines Co. and Japan Air System Co., the nation's No. 1 and No. 3 air carriers, agreed Monday to integrate to create the world's sixth-largest airline in terms of passenger miles.

The move would leave the domestic air market dominated by only two groups -- All Nippon Airways Co. with a group share of 49 percent, and JAL-JAS with 48 percent.

The merger will reduce costs and help JAL and JAS survive intensifying global competition, the firms said at a joint news conference in Tokyo. JAL has strong international networks, while JAS has focused on the domestic market.