By Xu Aiying and Lee Jihae

The nation's top airline Korean Air will acquire No. 2 Asiana to form what is expected to be the world's seventh-biggest air carrier.

The government on Nov. 16 finalized a resolution on the merger of the two airlines at a minister-level meeting on raising industrial competitiveness at Government Complex-Seoul chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki.

The Korea Development Bank (KDB), the main creditor bank of Asiana, and Hanjin KAL, the parent company of Korean Air, concluded an investment contract worth KRW 800 billion to boost the competitiveness of the air transportation sector.

The plan is for the KDB to inject the sum in Hanjin KAL, which will use the money to acquire Asiana through its affiliate Korean Air.

Hanjin KAL will take part in Korean Air's increase of paid-in capital with KRW 2.5 trillion to acquire Asiana. Korean Air will invest KRW 1.8 trillion to acquire new Asiana shares worth KRW 1.5 trillion and convertible bonds worth KRW 300 billion.

As of late last month, Korean Air had 164 planes and Asiana 79, and both have a combined net worth of KRW 40 trillion. Their merger is thus expected to form one of the world's 10 biggest airlines.

The International Air Transport Association said Korean Air ranked 19th and Asiana 29th worldwide last year in the transport of passengers and cargo.

The merger will also change the landscape of Korea's aviation industry; the country has 11 air carriers.

Hanjin Group, which owns Korean Air, will continue to own the latter's budget brand Jin Air and Asiana affiliates including Air Busan and Air Seoul. Thus the group will own five carriers. 

xuaiy@korea.kr