BOEING and McDonnell Douglas are to merge and create the world's largest aircraft manufacturer and a mammoth in civil aviation, aerospace and defence, they announced yesterday.

The merger is estimated to be valued at over £8 billion and will place Boeing, already the world's leader in civil aviation, far ahead of Europe's Airbus in the market for commercial aircraft.

The combined company is likely to control 75% of the global market for commercial aircraft.

According to Boeing figures it had 60 per cent of the civil aviation market between 1990 and 1995, while Airbus had 20 per cent and McDonnell Douglas had 5 per cent.

The new group, with an estimated £30 billion in revenues, will operate as the Boeing Company, said Boeing chairman, Mr Phil Condit, at a surprise joint news conference with McDonnell Douglas officials in Washington. McDonnell Douglas will remain a division within the company.

"By bringing these two companies together we can better serve our customers and our shareholders, Mr Condit said.

"We can look forward to a very exciting future as an integrated aerospace company.

Mr Condit will be chairman and chief executive officer. McDonnell Douglas chairman, Mr Harry Stonecipher, will be president and chief operating officer of the company.

"This is great news for the airline industry, for our nation's defence programs, and for space programs worldwide," Mr Condit said.

"The strength of our people, and that of our infrastructure and financial position will benefit our customers and shareholders, and position us to meet the global aerospace needs for the 21st century."

Under the terms of the deal, McDonnell Douglas shareholders will receive 0.65 shares of Boeing common stock for each share of McDonnell Douglas common stock, the companies said in a statement.

Based on the closing price of Boeing stock (96-3/4) Friday, the deal is estimated to be worth over £8 billion.

The transaction is subject to approval by the shareholders of both companies and certain regulatory agencies, and is expected to close as early as mid-1997.

The combined company will have about 200,000 employees. This includes the recent merger of Rockwelt aerospace and defence units into Boeing.

McDonnell Douglas, the number three airliner producer behind Europe's Airbus consortium, has relied more recently on defence as its market share has slipped in civil aviation.

McDonnell Douglas, based in St. Louis, Missouri, is the leading maker of military aircraft and the number two US defence contractor but suffered a big setback recently with its elimination from consideration for a new Joint Strike Fighter, believed to be one of the biggest military contracts ever.

In the first nine months of 1996, Seattle, Washington-based Boeing earned £525 million on sales of £10 billion. It employs 105,000 people.

McDonnell Douglas posted a 1995 loss of £260 million on £9 billion in revenues but its nine-month results for 1996 showed a profit of £363 million on £9.6 billion in revenues. It has 63,612 employees.

The investigation into the cause of the TWA Flight 800 disaster in July has led to calls for modifications to be made to the central fuel tanks of Boeing 7475 and other aircraft with a similar tank design. The Boeing 747 fleet worldwide is approaching 1,100.