Korean Air has signed a deal to acquire local rival Asiana Airlines.
The board of directors at the national flag-carrier approved the deal – worth $1.6 billion – earlier.
As part of the transaction, Korean Air will acquire low-cost regional carrier Air Busan, largely owned by Asiana Airlines, and fully-owned low-cost Air Seoul.
A statement Korean Air owners, Hanjin Group, said: “This acquisition and the expansion of its routes, fleet and capacity will give the airline the competitiveness to compete with global mega airlines.
“The merger of the two airlines is expected to further enhance the competitiveness of the Korean aviation industry with more streamlined route operations and lower costs.
“More slots secured at Incheon International Airport, a transport hub in Asia, through the consolidation of the airlines, may lead to an increase in joint ventures with global airlines and greater transfer demand, which will also spur the growth of the domestic aviation industry.”
Korean Air is the largest airline in South-Korea.
Once the acquisition has been completed, the South-Korean government expects that Korean Air will become one of the ten biggest airlines in the world.
Korean Air will issue KRW 2.5 trillion (£1.7 billion) of new shares in early 2021 in order to fund the acquisition, with Hanjin KAL receiving a KRW 800 billion (£550 million) investment from Korea Development Bank.
Asiana Airlines, has been plagued by financial problems prompting parent company Kumho Industrial to put its 31 per cent stake up for sale at the end of 2019 as it came under pressure from creditors.
Asiana has a fleet of around 80 aircraft, including 11 A350s and six A380 superjumbos, while Korean Air operates around 170 aircraft, including ten A380s.