It’s the first big consolidation in the airline industry since the global travel slump began.
Korean Air Lines is taking charge at Asiana.
It will invest about 1.6 billion dollars to become the largest shareholder in its local rival.
The pair hope that working together will help them survive the ongoing collapse in demand.
It’s also likely a relief for heavily indebted Asiana, which was kept going in September by a cash injection from creditors.
To pay for the deal, Korean Air says it will issue new shares next year, with any excess funds raised used to pay off debts.
The airline says it expects the deal to be finalised by the second half.
Combining the two firms will mean up to 1,000 overlapping roles.
But for now the plan is to avoid compulsory redundancies.
The tie-up will also integrate the two airlines’ budget carriers, including Air Busan and Air Seoul.
It all marks the biggest shakeup in South Korea’s air travel market since Asiana was founded ahead of the 1988 Seoul Olympics.
The new carrier will command about 60% of international routes from the country.
Asiana shares closed almost 30% higher on Monday (November 16), while Korean Air was up over 12%.