Govt okays A-I, IA merger

There merger would create a single national carrier with revenues of $3 billion and a fleet of over 130 aircraft.

india Updated: Apr 05, 2006 12:24 IST

Air-India and Indian Airlines have been given the formal go-ahead by the Government to create a single national carrier with revenues of $3 billion and a fleet of over 130 aircraft.

The Prime Minister's Office has given the go-ahead to chalk out a plan to create synergies in the services of the two state-owned carriers, Civil Aviation Minister Praful Patel said after the Government signed two pacts to modernise Mumbai and Delhi airports.

"It's an absolutely logical proposal to consolidate and optimise the use of the assets of the two public sector airlines," he had said, adding the clearances would be forthcoming in the present financial year.

The merger between Air India and Indian Airlines, which operates under the brand name "Indian", will result in a Rs 130-billion airline, which will have a fleet of over 130 aircraft in the next few years.

Air-India 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. On delivery about 40 of the existing 46 aircraft are to be phased out.

Similarly, Indian Airlines and its wholly owned subsidiary Alliance Air have 70 aircraft. They await the induction of 43 new Airbus aircraft from November. For them, too, several of the old aircraft will be phased out.

This is the second mega merger plan in the Indian aviation industry announced in recent months, after private sector Jet Airways announced that it is taking over rival Air Sahara for around $500 million.

In the international space, too, there has been a spate of mergers among airline companies - notably the royal Dutch carrier KLM's takeover by Air France and the German airline Lufthansa's takeover of Swiss Air.

Patel, along with the top management of the two airlines, had met Prime Minister Manmohan Singh on the issue last month. Officials of the two airlines also made short presentations on the merger proposal.

Sources in the ministry said that a formal plan for the strategic merger of the two airlines was likely to be placed before the Cabinet for approval in the next two months. Patel had initiated the move in February.

Experts feel that the merger will give India a competitive edge in the crowded international market - something the country had lacked during the past two decades due to inadequate fleet strength.

The merged entity will be comparable in size to some of the world's medium-sized airlines but remain a far cry from big players like Singapore Airlines, Emirates and British Airways that have fleets of over 400 planes.

First Published: Apr 04, 2006 22:13 IST