Air-India and Indian to merge, to enhance profitability by over US$133m

The Indian government has cleared the merger of two state-run carriers Air-India and Indian (Indian Airlines Ltd). (3/2/2007)Government will continue to be the sole owner of the merger entity and has made it clear that the public sector character of the merged airline would be maintained. But the Government may look for IPO after getting approval of a committee consisting of Finance Ministry, according to local media. The merger of the two airlines would enable them to leverage their combined assets and capital better and build a strong and sustainable business. The potential synergies are expected to enhance the new combined airline’s profitablity by over US$133 million per annum, or about four per cent, of their current combined assets, as per the information available. By 2010-11, when all the new aircraft ordered by the two carriers are inducted into the fleet, the merged entity’s employee-aircraft ratio would come down to about 200:1, comparable with any major global airline. While Air-India has ordered 68 Boeing planes, Indian has finalised the acquisition of 43 Airbus aircraft. According to the report submitted by Accenture, there will be no manpower rationalisation as the consultancy has suggested ‘careful integration’ of manpower at various levels. It has also suggested a top-to bottom integration of the employees. It is proposed that the pay-scales be revised to bring parity in promotion procedures. According to a member of the core group that had prepared the merger report, the roadmap had been prepared after studying eight models of merger across the globe including that of Lufthansa.

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