Korean Air Lines, South Korea's biggest air carrier, will acquire the country's debt-ridden second-biggest air carrier, Asiana Airlines, Yonhap news agency reported on Monday citing the state-owned Korea Development Bank (KDB).

The KDB, one of the major creditors of the debt-laden airline, will invest in 500 billion won (450.9 million U.S. dollars) of shares and 300 billion won (270.5 million U.S. dollars) of exchangeable bonds to be sold by Hanjin KAL, a holding company of airline conglomerate Hanjin Group.

Hanjin KAL will lend the raised fund of 800 billion won (721.4 million U.S. dollars) to Korean Air to help its affiliate take over Asiana Airlines, while purchasing 731.7 billion won (659.8 million U.S. dollars) of stocks out of the combined 2.5 trillion won (2.3 billion U.S. dollars) in shares to be issued by Korean Air for the acquisition.

Korean Air will acquire 1.5 trillion won (1.4 billion U.S. dollars) of new shares and 300 billion won (270.5 million U.S. dollars) of perpetual bonds to be issued by Asiana Airlines. After the acquisition, Korean Air's stake in Asiana Airlines is expected to rise to 63.9 percent.

After the completion of the acquisition, Korean Air planned to integrate three low-cost carriers among Korean Air's Jin Air, and Asiana Airlines' Air Busan and Air Seoul in a gradual manner.

A consortium, led by HDC Hyundai Development, had sought to take over Asiana Airlines, but the deal was dropped in September on differences over the terms.