IA-AI to merge to create mega airlines

By agencies   |   Thursday, 23 March 2006, 08:00 Hrs
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NEW DELHI: Faced with mounting losses and increasing competition, two state owned carriers Indian and Air India have decided to merge to create a airlines behemoth. The chiefs Air India V.Thulasidas and Indian (formerly Indian Airlines) V. Trivedi along with aviation minister Prafful patel met the Prime Minister Manmohan Singh and gave a detailed presentation to him, a newspaper reported. Patel said the merged entity could go for an IPO to raise capital for expansion. According to sources, the merger is a mere formality and an announcement is to be very soon, the New Delhi based Hindustan Times said. Patel and the two chairmen have been perturbed over the dwindling market share of the two airlines. The merger presentation was an exposition on how a gigantic flag carrier could take on international players as well as those in the domestic private sector. The merger will result in a $3.2 billion flagship carrier, which now awaits a slew of new aircraft. Air-India presently has 42 aircraft while its low cost subsidiary Air-India Express has four. The airline has signed a multi-billion dollar deal with Boeing for 68 new aircraft. About 40 of the existing 46 aircraft will be phased out as they are either leased or old. Similarly, Indian has 60 aircraft, and it awaits 43 new Airbus aircraft. Even it will have phase out several old aircrafts. The thinking of Civil Aviation Ministry on the merger is driven by an increasing need for synergy and routes and logistics rationalization. The biggest impediment on the path of this merger will be manpower rationalization because both airlines are human resource-heavy, having more employees per aircraft than any other airline in the world, the paper said.