Korean Air Lines, South Korea's No. 1 carrier, is seeking to acquire rival Asiana Airlines with the support of the state-run Korea Development Bank, local media reported Friday, citing airline industry sources.

If a merger deal involving South Korea's two major airlines materializes, it would reportedly create the world's 10th-largest airline company in terms of revenue passenger kilometers, an industry metric that shows the distance traveled by paying passengers.

Yonhap News Agency reported that Hanjin KAL Corp., which owns 30 percent of Korean Air, confirmed it is considering to acquire debt-ridden Asiana Airlines Inc., if the country's second largest carrier's creditors make an official proposal.

KDB, the primary creditor to Asiana, "is likely to make an announcement involving the sale of Asiana next week and Korean Air also looks set to release its statement on the matter," Yonhap quoted a Hanjin KAL official as saying.

The official was responding to reports that KDB proposed to invest in shares to be issued by Hanjin KAL, and the holding company of Hanjin Group would use the money to buy Asiana.

The most likely scenario, according to local media, is that the KDB provides capital to Hanjin KAL for the purchase of Kumho Industrial's 30.77 percent stake in Asiana. That plan would leave KDB as the third-largest shareholder of Hanjin KAL.

For the deal to be successful, Hanjin KAL would have to increase its capital by issuing new stocks worth up to 1 trillion won (US$896 million), which the KDB would then purchase, The Korea Times reported.

The move comes after HDC Hyundai Development in September withdrew from acquiring Asiana after the airline's debt surged due to the COVID-19 pandemic.

ALso Friday, private equity fund KCGI, a major shareholder of Hanjin KAL, strongly opposed the possible acquisition, claiming the measures will create losses for customers, shareholders and creditors.

"Hanjin KAL is capable of raising more than 1 trillion won through the sale of its non-core assets and other means, which means it does not need to issue new shares to raise capital. It is Korean Air that needs a capital injection, not Hanjin KAL," it said in a statement reported by local media.

"There needs to be a thorough review and transparent negotiations on the acquisition procedure," it said.

Hanjin Group Chairman Cho Won Tae's estranged older sister Hyun Ah and her allies, including KCGI and Bando Engineering & Construction, are said to hold a 46.71 percent of the company's shares compared to his and Hanjin KAL's 41 percent.

Korean Air has 164 aircraft and Asiana has 81.

==Kyodo

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