Phoenix ? US Airways Group Inc. and America West Holdings Corp., the nation’s seventh and eighth largest carriers, said Thursday that they would merge.

The combined company, which would operate under the name US Airways, would be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

The goal of the merger is to stitch together two geographically distinct carriers with a history of financial struggles into a stronger airline that would compete better with lower-cost rivals such as Southwest Airlines Inc. and JetBlue Airways Corp.

“Building upon two complementary networks with similar fleets, closely aligned labor contracts and two outstanding teams of people, this merger creates the first nationwide full service low-cost airline,” said Doug Parker, chief executive and president of America West Holdings. “Through this combination, we are seizing the opportunity to strengthen our business rather than waiting for the industry environment to improve.”

US Airways President and CEO Bruce Lakefield said the merger would ensure US Airways’ long-term viability and the security of its employees.

US Airways, which last year made its second trip into bankruptcy in two years, slashed worker pay by $1 billion a year and shed $3 billion in pension obligations.

America West and U.S. Airways jets await takeoff from Sky Harbor International Airport in Phoenix. U.S. Airways Group Inc. and America West Holdings Corp. said Thursday that they are merging.

The Arlington, Va.-based carrier said its goal was to reinvent itself as a low-cost carrier like Jet Blue or America West. But even after the latest cost reductions, the airline struggled as fuel costs soared and low-fare competitors drove ticket prices down.

America West, which was founded in 1983 and is based in Tempe, Ariz., operates flights across the country through its hubs in Phoenix and Las Vegas.

When Parker took over as chief executive in 2001, America West was dogged by a reputation as a carrier that delayed flights, lost luggage and left customers waiting.

The company was pushed to the brink of bankruptcy shortly after the Sept. 11, 2001, terrorist attacks and secured a $429 million loan guarantee from the federal government. Parker has said the guarantee allowed America West to avoid Chapter 11 bankruptcy, a move the airline might not have survived.

Its service record has since improved. In July 2003, the company reported its first of several quarters of profits after more than two years of losses. Its earnings since have been mixed, due largely to high fuel costs and too many cheap fares in the market.