Chile-headquartered LATAM Airlines has agreed separate business agreements to deepen its ties with IAG's British Airlines and Iberia - members of the Oneworld Alliance - as well as the American Airlines Group.
IAG said the joint business would benefit customers by providing better links between Europe and South America, greater choice of flights and enhanced frequent flyer benefits.
In a statement, it also said the airlines plan to seek approval from the appropriate competition authorities in South America and will inform the regulatory authorities in the European Union.
It is anticipated that regulatory approval could take between 12 and 18 months
American and LATAM also plan to apply for immunity from competition law, which would help the airlines coordinate schedules and prices for flights among their countries of operation.
IAG chief executive Willie Walsh said that the airline already has a close commercial relationship with LATAM Airlines Group as part of the Oneworld Alliance.
"This joint business would benefit customers by providing them with easier journeys to more destinations with better aligned schedules and increased frequencies. This would boost both tourism and business travel between South America and Europe," Mr Walsh added.
IAG completed a deal to buy Aer Lingus last year.
