Korean Air Lines Co., South Korea's No. 1 carrier, decided at a board meeting on Monday to buy smaller rival Asiana Airlines Inc. for 1.8 trillion won ($1.62 billion), the company said.
The major reorganization of the aviation industry in South Korea comes as airlines worldwide struggle financially due to a sharp fall in air travels amid the coronavirus pandemic.
When including budget carriers under their wings, the two airlines together command a 62.5 percent market share in domestic routes, according to local media. The Korea Fair Trade Commission must approve the acquisition.
Hanjin Group Chairman Cho Won Tae, whose conglomerate owns Korean Air, issued a statement saying that the decision to acquire the country's struggling No. 2 carrier is meant to allow the South Korean airline industry to grow sustainably.
To realize the acquisition, the state-run Korea Development Bank, which is leading a group of creditors to Asiana Airlines, will invest 800 billion won in Hanjin KAL Corp., the holding company of the group.
Korean Air will acquire enough shares in Asiana Airlines to become its largest shareholder.
Korean Air ranked 28th and Asiana 42nd in the world in 2019 in terms of the kilometers traveled by paying passengers, according to the International Air Transport Association. Combined, the two would become the world's 15th-largest airline company.
That would put the company ahead of regional rivals All Nippon Airways Co. and Japan Airlines Co., which were the world's 22nd and 33rd, respectively.
Kumho Asiana Group, the struggling conglomerate that has Asiana Airlines under its umbrella, decided in April 2019 to sell the carrier.
After acquisition talks with a major construction company fell through in September due to the airline's accumulating debt amid the coronavirus pandemic, the state-owned bank began looking for a new buyer.
Related coverage:
Taiwan start-up airline StarLux to fly to Tokyo, Osaka next month
JAL to post net loss of up to 270 bil. yen in FY 2020 due to pandemic
M'bishi Heavy freezes SpaceJet development as virus clouds outlook
