Air India, Indian to merge

By agencies   |   Wednesday, 05 April 2006, 19:30 IST
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NEW DELHI: The Government of India has taken its first step towards merging its flagship carrier Indian Airlines Ltd. and Air India Ltd. as part of a wider strategy to take on nimble private players. The Civil Aviation Minister Praful Patel said, “The government has, in principle, decided to move ahead and merge the two airlines. The ministry has initiated the process and in the final stages it will go to the cabinet and then the parliament for approval.” “Our plan is to make it (among) the top 20 carriers of world,” he added. Both international carrier Air India and domestic-focused Indian Airlines have ageing fleets compared to rivals such as Jet Airways Ltd. and Kingfisher Airlines Ltd. Consolidation in the nascent industry, which saw four airlines launched last year, appears inevitable as more carriers appear on the horizon. Cut-rate pricing is also putting pressure on profit margins of all carriers. Jet's recent $500-million purchase of smaller rival Air Sahara cemented its dominance in India's domestic sector, which is forecast to grow more than 20 percent a year over the next five years, boosted by higher incomes and lower fares. The two carriers, beset with large workforces and strong unions, are also on an aircraft-buying spree to augment their fleet and win back market share. Separately, the government also signed agreements with two private consortia led by Indian business groups to enable them to take control of and modernize the nation's two busiest airports, New Delhi and Mumbai. The GMR consortium, led by the infrastructure and manufacturing group GMR, has won the New Delhi bid, while GVK South African Airports won the Mumbai bid. The two airports handle about 65 percent of India's international traffic of 19 million passengers annually.