The South Korean national railroad operator Korea Railroad Corporation (Korail) has announced it will acquire the country’s loss-making privately operated Airport Railroad Co (AREX) rail line for 1.2tr won ($979.3m).

The 61km double-track rail line connects the Incheon International Airport with Seoul’s Gimpo airport. The line is partly in operation with completion expected by the end of 2010.

The move is aimed at reducing the government’s subsidies to the troubled railway .

According to the Ministry of Land, TRANSPORT and Maritime Affairs, the takeover would lower the subsidy from 13.8tr won to below 6.7tr won until 2039.

Nearly 267bn won of subsidies have already been injected into the railway over the last two years.

Korail, which is also facing losses, has already signed a memorandum of understanding on the deal to buy an 88.8% stake in AREX. The deal is expected to be finalised during September.

The 5tr won AREX is the country’s first railway to be built and operated by private investment with the state’s investment totalling 1.9tr won.

Work was carried out by a Hyundai Engineering and Construction-led consortium on a ‘build, operate and transfer’ basis under a contract that runs until 2040.