PHOENIX – US Airways Group and America West Holdings, the nation’s seventh- and eighth-largest carriers, are merging to create an airline that they hope will be able to compete with lower-cost competitors.

The companies said yesterday they will operate under the name US Airways and will be funded by $1.5 billion in new capital from a variety of investors, including aircraft maker Airbus.

The merger’s goal 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 and JetBlue Airways.

“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 Douglas 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 will 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. But even after the 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 Mr. 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 September 11, 2001, terrorist attacks and secured a $429 million loan guarantee from the federal government. Mr. 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 have since been mixed, due largely to high fuel costs and too many cheap fares in the market.

Mr. Parker will lead the merged airlines, which will be headquartered in Arizona. The airline’s 13-member board will include six members from the current America West board and four members from the current US Airways board.

The merger with America West is designed to provide the final investment necessary to allow US Airways to emerge from bankruptcy. The deal must be approved by the U.S. Bankruptcy Court in Alexandria, Va., where the merger proposal will be subject to competing bids.

Mr. Parker said in a conference call with reporters that he does not expect any bidding war to emerge in bankruptcy court.

While the entire airline industry has struggled since the September 11 attacks, US Airways’ difficulties have been particularly acute. Even before then, federal regulators rejected a proposed takeover by UAL’s United Airlines that US Airways executives had believed would cure the carrier’s woes.

After September 11, US Airways suffered from the prolonged closure of Reagan National Airport across the river from downtown Washington, D.C., where it was the largest carrier. High-fare business travel, which had been one of US Airways’ strengths, dried up. Long security lines at airports persuaded many travelers to drive rather than fly on some of the short-haul flights in which US Airways had specialized.

US Airways’ chairman, David Bronner, has said that one reason a merger between US Airways and America West can work is that US Airways’ management team will be happy to step to the sidelines. Mr. Lakefield is a longtime associate of Mr. Bronner who had no experience in the airline industry before his appointment to the US Airways board of directors in 2003.