The combination would have 30% of Japan's international air cargo market and would be the single largest cargo transport provider in Japan.  The merger, due to complete in April next year, should enable the cargo business to make a profit, JAL said.  The international cargo business has been hit by the global recession.

In June, demand for international air cargo contracted for the 13th consecutive month, IATA, the international trade body, said.  Demand was unlikely to return to the levels seen in early 2008 for several more years, it added.

"The air cargo business has been one of the hardest-hit industries by the recession from last year," Hitoshi Oshika, corporate officer of Nippon Yusen, told reporters.  The two airlines already have a code-sharing alliance, under which they use each other's networks to sell and transport cargo.  Government help.

JAL reported a significant loss in the three months to June after ticket sales slumped during the period.  The airline made a loss of 99bn yen ($1bn; £618m) during the quarter, down from a 3.4bn yen loss a year earlier.

The carrier - currently restructuring under state supervision - has already said it will cut domestic and international flights.  In June, JAL - Asia's largest airline by revenue - secured government loans worth 100bn yen.