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AI, Indian Airlines may merge

A merger could help raise the competitiveness of the airlines against privately owned carriers.

india Updated: Feb 21, 2006 12:43 IST
Associated Press
Associated Press

State-owned carriers Air India and Indian Airlines may be merged after their initial public offerings are completed, Minister for Civil Aviation Praful Patel said on Monday.

A merger could help raise the competitiveness of the airlines against privately owned carriers, Patel told reporters on the sidelines of an aviation conference in Singapore.

"We are looking into synergizing the operations of Air India and Indian Airlines to make them stronger carriers, but we haven't decided on the structure (of a merged carrier)." A final decision on the merger will be made later this year, the minister said.

Indian Airlines is primarily a domestic carrier with a small number of foreign destinations, while Air India travels is an international airline.

Patel said Air India will delay its planned IPO by at least two months as the final details of the offer are still being negotiated. "Air India's IPO has been delayed...we now expect that (both) IPOs will be brought out to investors by May," Patel said. "We are looking at about 20 per cent to 25 per cent public ownership of the companies."

Financial details are still being worked out between the airlines and their advisers, and Patel said he expects substantial progress to be made in the negotiations in coming weeks.

Air India Chairman V Thulasidas had previously said the airline would launch its initial public offering by March, the end of the carrier's financial year.

The proposed IPOs will help raise funds for major fleet expansion plans by both airlines, which are coming under intensifying competition from new low-cost carriers such as Air Deccan, Spice Jet and Kingfisher Airlines.

The Government recently approved Air India's plan to buy 68 Boeing aircraft at a cost of about $7.88 billion, while Indian Airlines is in the final stages of discussions to purchase 43 new Airbus aircraft worth $2.25 billion.

India's aviation sector is witnessing 25 per cent annual growth in both cargo and passenger traffic, boosted by an expanding economy and rising incomes among the country's estimated 300 million-strong middle class.

Patel expects the growth rate to be maintained over the next five years.

First Published: Feb 20, 2006 13:53 IST