South Korean carrier Korean Air has agreed to acquire Asiana Airlines in a KRW1.8tn ($1.62bn) deal.

The deal is expected to give Korean Air a 63.9% stake in Asiana Airlines, Nikkei Asia reported.

Korean Air owner Hanjin KAL said that the acquisition is aimed at stabilising the Korean aviation industry, which is affected by the pandemic.

In a statement, Hanjin said: “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.

“Customers will be able to enjoy a wider range of choices in routes and schedules. They will also be able to benefit from more convenient transfer options, integrated mileage and enhanced safety in all areas.”

State-run lender Korean Development Bank is supporting the deal with an investment of KRW800bn ($723m) in Hanjin KAL, which will facilitate the group’s acquisition of new shares in KAL.

KAL will leverage the fund in the acquisition of Asiana shares.

With this acquisition, the airline expects to be ranked as one of the top ten airlines in the world.

In September, the proposed acquisition of Asiana Airlines by Hyundai Development Company (HDC) from Kumho Industrial collapsed after creditors plan to invest $2bn into Asiana Airlines.