South Korea's largest airline Korean Air announced plans to acquire its main rival Asiana Airlines in a government-backed deal reportedly worth KRW 1.8 billion to help both airlines survive the ongoing COVID-19 pandemic.

According to reports from The Korea Herald and the Nikkei Asian Review, the Seoul-based airline plans to acquire a majority 63.9% stake in Kumho Group-owned Asiana through a purchase of KRW 1.5 trillion won and KRW 300 billion of its corporate bonds.

To facilitate the move, Korean Air will raise KRW 2.5 trillion won from shareholders, while state-run Korea Development Bank would invest KRW 800 billion in Korean Air's parent company Hanjin KAL.

As part of the acquisition plan, Korean Air plans to integrate Asiana's budget carriers – Air Busan and Air Seoul – with its own Jin Air brand.

While the plan has been announced, the deal is subject to review by South Korea's antitrust regulators.

"The company made the decision to help the country's airline industry continue to grow (amid uncertainties) and minimize the injection of public funds (into Asiana)," Korean Air Chairman Cho Won-tae said in the statement.

The plan by Korean Air follows the collapse of the deal made for Asiana's controlling stake involving a consortium lead by Hyundai Development Company (HDC) and Kumho Industrial earlier this year. After initially signing the deal, HDC raised concerns over Asiana's value due to the pandemic and asked to renegotiate the terms of the agreement. The demand for renegotiate the terms was rejected by Asiana's creditors.

Should the move get approval from South Korea's government, it will create a combined airline based in Seoul with a fleet of around 250 aircraft with a vast network of destinations within South Korea, the Asia/Pacific, Europe, and North America. Korean Air has the larger fleet of 170 aircraft compared to Asiana's 80 jets.

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