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Post Info TOPIC: AI and IC merger-Inside Talk


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http://www.business-standard.com/compindustry/storypage.php?leftnm=1&subLeft=1&chklogin=N&autono=263216&tab=r


No job loss, assure airlines chiefs
 
P R Sanjai / Mumbai October 31, 2006 
 

Employees promised protection of salaries and seniority. 
 
The chiefs of Air-India and Indian Airlines have written to their respective employees, assuring that there will be no retrenchment after the merger of the two state-owned aviation companies. 
 
The letter also promises protection of salaries and seniority. 
 
“I would like to assure you that HR issues are a top priority with the government and the board and management of the two companies and any retrenchment of personnel as a result of the merger has been categorically ruled out,” Air-India chairman and managing director Vasudevan Thulasidas said in a letter to the employees. 
 
A similar letter has gone to the Indian Airlines’ employees from the company’s chairman and managing director V Trivedi. 
 
However, a source said that there could be a freeze on fresh hiring for some time. 
 
“A fair approach to handling people’s concerns will be adopted. The process would be tailored to ensure that no employee is worse off as a result of the merger and due care will be taken to protect remuneration, perquisites and status of all the employees,” added the A-I chief’s letter. 
 
Accenture and Ambit Corporate Finance are currently advising the government on the merger proposal of the two airlines. 
 
The advisers are in the process of working out common guidelines in order to ensure that employees are not losing out in terms of seniority and wage structure in the merged entity. Air-India has 15,500 employees, while Indian Airlines has 18,000. 
 
Industry analysts pointed out that the ideal employee-aircraft ratio would be between 250 and 300. 
 
“Under the assumption of 120 fleet, the employee-aircraft ratio would be 280, which is ideal for an international airline operating bigger jets compared to a region-centric, low-cost carrier or a small full-service carrier. We may not go for further enhancement of headcount, but, at the same time, there will not be any retrenchment,” said a source close to the discussions. 
 
According to the report prepared by consultants, the merged entity, with 120 planes, will have a bigger fleet than Emirates (93), Singapore Airlines (118) and Malaysian Airlines (110). 
 
Earlier, the government had appointed a core group of senior officials in the civil aviation ministry. 
 
In addition, four joint working groups have also been constituted to coordinate on each of the major issues likely to arise during the process of merger, namely commercial, human resources, finance and operations. 
 
The letter to the employees pointed out that the merger of Air-India and Indian Airlines was not a new proposition. “It has become imperative now, more than ever earlier, to effectively leverage on synergies arising out of complementary networks so as to position ourselves as a dominant player in the aviation arena,” it added. 
 
 



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I'll ask a hyphothetical question. If and when IC and AI are merged and it is decided that the merged entity will be called "Indian", can the Gov't sell the brand name "Air India" to anybody willing to pay the price?

Maybe Nitin can answer this question.

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Govt may go for single IA, A-I float post merger
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http://www.business-standard.com/economy/storypage.php?leftnm=3&subLeft=1&chklogin=N&autono=264808&tab=r
Govt may go for single IA, A-I float post merger
 
Bipin Chandran / New Delhi November 15, 2006
 
 
 
The government has changed its plan for initial public offers (IPOs) of Indian Airlines and Air-India by deciding to go for a single float after the two airlines are merged next year, according to a senior civil aviation ministry official. 
 
The group of ministers (GoM) on the merger, due to meet on November 27, would take the final decision, the official said. 
 
According to industry analysts, the long process of unification and the consequent IPO may put on hold the plans of the two airlines, who need money for fleet acquisition. 
 
Indian Airlines has placed an order with Airbus for buying 43 A 320 aircraft for around $2 billion while Air-India has placed a $6.9 billion order with Boeing for 83 aircraft. 
 
The two have to make advance payments for these buys. The government had earlier considered separate IPOs keeping in view the long time needed for the merger and two carriers’ urgent need for funds. 
 
According to analysts, the merger may take around a year to complete. 
 
The merged entity will have around 150 aircraft and a balance sheet size of Rs 15,000-Rs 17,500 crore. The government is of the view that a bigger balance sheet will enable a better valuation and help the merged entity raise more funds than what the two carriers will be able to raise separately. 
 
According to sources, the GoM will consider the report on the merger by Accenture and give a final shape to the proposal. It will also decide the quantum of equity to be off-loaded. 


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RE: AI and IC merger-Inside Talk
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karatecatman wrote:


The government has changed its plan for initial public offers (IPOs) of Indian Airlines and Air-India by deciding to go for a single float after the two airlines are merged next year, according to a senior civil aviation ministry official.  
 



I have been saying this from a long time (maybe i get ideas before the GoI does )

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Designer look for Air India crew on hold
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http://www.ndtv.com/morenews/showmorestory.asp?slug=Designer+look+for+Indian+crew+on+hold&id=96579&category=National
Designer look for Air India crew on hold
--------------------------------------------------------------------------------


Puja Talwar


Saturday, November 18, 2006 (New Delhi):



The sky may be the limit for Indian fashion but the national carrier is unwilling to pay a price to drape its staff in designer styles.


In May 2005, Air India approached renowned designers Tarun Tahiliani and JJ Valaya to send in sketches for new staff uniforms for which the final choice would be made by French couturier Pierre Cardin.


In June 2005 Tahiliani and Valaya were short listed by the airline to design staff uniforms. Designers sent samples but no decision was forthcoming.


In October, a letter from Air India informed the designers that it planned to continue with existing uniforms and agreed to pay a fee of Rs 25,000 for their design efforts. But the designers say that is not enough.


"It's a tragedy they don't want to pay they didn't have the right to behave like this they say just work on the existing uniforms who is to pay for this, a waste of colossal time," said Tahiliani.


"We designed everything and I told them it was 25,000 for one round and I sent them a letter that you have be financially responsible for these samples its tragic I am going to file legal charges," he added.


Fashion designer Ritu Kumar has been through a similar experience with Air India.


Other designers agitated


Six years ago she was approached by the airline to design staff uniforms but after she sent in several samples her designs were rejected.


"I had been approached. I gave them designs which was not easy to put and they had a meeting and they gave the tender to someone else they are representing the country it cant be done in an adhoc manner," said Ritu Kumar.


When contacted, Air India said as they were busy with the merger with Indian Airlines, the new uniforms would have to wait. Should the designers take legal action they have a ready defence.


"There can be no breach of contract because there is no written contract. It's not confirmed its still an open issue once the merger is done we will reopen it so the chance of litigation doesn't arise," said S Venkat, GM Public Relations, Air India.


So as of now the Maharaja continues with its old set of clothes.


Hope a case is filed. AI needs to be taught a lesson.



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Post-merger,AI, Indian to fly in formation
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http://economictimes.indiatimes.com/articleshow/589341.cms
Post-merger,AI, Indian to fly in formation
G GANAPATHY SUBRAMANIAM


TIMES NEWS NETWORK[ MONDAY, NOVEMBER 27, 2006 02:26:56 AM]
 
NEW DELHI: The mega airline to be formed by merging Air India and Indian will adopt a decentralised business model with various departments of the carrier functioning as independent units with their own chief executive officers (CEOs).


Half-a-dozen such units would be carved out to handle various functions like engineering, cargo, ground handling, apart from the primary activities of providing full-service and low-cost flights. The civil aviation ministry has urged the finance ministry to provide stamp duty waiver for the merger and permit carryover of unabsorbed depreciation to be set off against future profits of the merged entity.


These proposals and a host of other issues including branding would be considered by the empowered group of ministers (eGOM) on Monday. The contours of the merger blueprint will be finalised by the eGOM and forwarded to Cabinet, government sources said.


Accenture, the consultant appointed for assisting the merger, has asked the government to decide on key aspects like branding and headquarters of the merged entity. According to initial consultations, the merged entity will deploy two flagship brands — one for full-service operations and the other for low-cost connections. Therefore, the government — as owner of the two companies — has to take a call on retaining either the Air India or Indian brand.


The other option is to go for a new brand. Similar is the case with low-cost operations which are being handled by A-I Express for Air India and Alliance Air for Indian. In the case of headquarters, the government has to choose between Mumbai where AI is headquartered or Delhi which houses the Indian headquarters. The other option is to go for a new location to headquarter the merged entity.


The finance ministry will take a on call on the proposal for carrying forward the unabsorbed losses of AI and Indian so that the merged entity can set it off against future profits. The civil aviation ministry has made a strong pitch for relief to the merger under Section 72 A of the Income Tax Act. The eGOM would also consider the demand for waiver of stamp duty involved in transferring the assets of the two companies to the new entity.


The holding company concept has been ruled out and the civil aviation ministry is seeking merger of AI and Indian into a new company, sources said. Once the government takes a view, the boards of the two companies have to formally approve the merger and getting endorsement from a high court.
It is understood that some departments feel that the recommendations of Accenture should be vetted by a committee of secretaries (CoS). Similarly, there are some outstanding issues related to business integration.


The merged entity will operate different departments like full service airline, low-cost airline, ground handling, maintenance, repair and overhaul, cargo and other activities as independent profit centres. There will be a separate CEO for each department and all the CEOs would be represented in the board of the merged entity, sources said.


This form of management is based on the Lufthansa model where different units, including ground handling and IT, function as independent profit centres under one group.


The eGOM — headed by external affairs minister Pranab Mukherjee — is meeting on Monday, sources confirmed. Other members of the committee include civil aviation minister Praful Patel, finance minister P Chidambaram, law minister HR Bhardwaj, defence minister AK Antony, tourism minister Ambika Soni, heavy industry and PSEs minister Santosh Mohan Deb and Planning Commission deputy chairperson Montek Ahluwalia. 
 



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couple of things that come to mind, which they would/should do, are



1.cross training or transfer of some/half of tech staff/facilities between DEL and BOM, so that either kind of aircraft can be taken care of at both the locations.



2.As they are opting for two tier model, which is full service carrier and "low-cost connections", it should give them greater freedom to operate flights without change of aircraft at either hubs e.g. HYD-BOM-DXB using a A320.  That would save passangers a lot of pain and relieve pressure off their lounges



3.As they have to keep just one brand/livery, it would be relatively easy for them to keep Air India for full service and Indian for LCC-connections



4.Rather than bitching as to where to keep the HQ and all the fuss, it would be better if they designate either of place just for name sake.  The CEO keeps put over there and senior management works from location of their choice.  The way businesses work today, you don't have meet each day to work.  This issue of HQ has to be played down if they want to avoid politics and time wasted because of it.  It is not just internal polictics, but also pressure from regional policital leaders that will cause a lot of problems.



5.And if Finance ministry is planning to absorb losses, then it should be the last time.



6.Liked their idea of each department working as independent profit center.  With this they should give individual CEOs power to think and work outside the box.  Say, if one CEO sees opportunities to generate revenue by working with another carrier, then he needn't run pillar to post to seek approval.


rgds


VT-ASJ



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This is the best


Liked their idea of each department working as independent profit center.  With this they should give individual CEOs power to think and work outside the box.  Say, if one CEO sees opportunities to generate revenue by working with another carrier, then he needn't run pillar to post to seek approval.



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Why does India even need a state owned carrier, let alone one that will be created by the union of two bloated, poorly performing entities?


Private carriers have shown themselves more than capable in providing superior air services to Indians.  If it weren't for the GOI and the Air India entitlement babus and bahenjis, Jet Airways and other private carriers would be flying to all corners of the globe by now. 


So pray tell, how does it serve the average Indian air traveller to have an Air Bharat or Hindustani Hans or Air Indian or whatever they're going to call this merged entity to be funded by their taxes (50% of which will be funded by the taxes paid by the city of Mumbai)?


Talking about names, they should just do away with the tarnished names of Air India and Indian Airlines and go for something novel and Indian like 'Varuna' (the Vedic God of the Sky).  Since the Indonesians have run off with Garuda, Varuna would be an ideal choice.  Also, nothing like a complete rebranding so that AI and IC babus and bahenjis don't get into a laathi fight with each other in the middle of a Bangalore-SFO nonstop!


 



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Jaysit - the country does not need a state owned air carrier - and I hope that the merged entity gets privatized sooner rather than later. That being said, unfortunately we do have 2 state-owned carriers, that are pretty dysfunctional in terms of being able to work together. Towards that end, the merger is more than welcome - especially as it's the merged entity will be joining *A, and hence being able to add a lot of value to the alliance. Ultimately AI+IC will be a much larger carrier than either 9W or IT, and will hopefully meet the needs of the Indian travelers.

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http://www.indiainfoline.com/news/innernews.asp?storyId=20762&lmn=1
Air India-Indian merger faces fresh delay
 
India Infoline News Service / Mumbai Nov 28, 2006 11:44 
 
The Govt has decided to refer the issue to a Committee of Secretaries (CoS). It will be headed by Cabinet Secretary BK Chaturvedi and give its report in 2 weeks


The proposed merger of Air India (AI) and Indian will take some more time to see the light of the day. The Government has decided to refer the issue to a Committee of Secretaries (CoS). The panel will be headed by Cabinet Secretary BK Chaturvedi. The decision was taken by the empowered group of ministers (eGoM) looking into the proposed merger of the two public sector airlines.


The CoS report will be completed within two weeks after considering the recommendations of Accenture, the consultant appointed to assist the Government in the process, Aviation Minister Praful Patel said on Monday after a meeting of the eGoM. According to him, the eGoM has sought clarity on legal and financial implications of the merger. "There are a lot of issues like legal aspects, concerns of the employees, taxes and stamp duty," he said.


 


This report is mild. CoS recommendations will most surely "kill" a merger.


The feedback of the eGOM meeting yesterday (after all that huge hype, that included contributions by an over excited Thulasi) is:


Praful Bhaiyya was disappointed (no grand announcement that could be made by him), as Pranab Da and A.K. Anthony had their way and wanted caution. 


It was suggested that Accenture get ready to make another presentation on a new date. PM might attend. Data presented to the over 90 minutes meeting yesterday was "a bit garbled", too many details which kind of flew over, and so the solution was to get the CoS to sort things out. Ministers couldn't be bothered in "a matter of great national importance". 


There are lots of employee problems that cannot  be wished away with just Thalasi and Viswa "writing a letter to all employees" asking them to rejoice in the formation of a new airline, and Praful Bhaiyya shouting from the rooftops that it was his brainwave and that the future is bright.  


The Left is putting pressure that a merger this scale is not such a great idea. Is licking its wounds after Praful Bhaiyya got away with the airport privatisation (DIAL, MIAL) issue. Doesn't want him to win this round too. Suspicion (Nilotpal Basu, Yechury and Gurudas Dasgupta) is that the after "getting the two airlines together", it will be easier to tackle both --- offloading in the IPO will be used as an excuse to privatise.  


Issue of duties/domestic/international flying. One example is that AI flight crew are not too receptive to do Tirupati-Hyderabad, and at the same time not want an IA captain who has done Silchar-Kolkata suddenly wanting to do 777LR Mumbai-Newark. Cabin crew also have a major prob --- AI aunties and IA aunties. Ditto with other staff --- postings, etc, etc.


A merger scenario shows that the IA part will be the strongest. The new fleet "that will be 130 jet stong and one that is capable of taking on the likes of British Airways, Singapore Airlines and Emirates" (and which happens to be Praful Bhaiyya's favourite line) will be very stong medium haul wise (a battalion of the A320 family followed by Embrear/Bombardier, Dornier and ATR). The fleet "that can take on the likes of BA, SQ and EK" will get to that position only in late 2008-09 when the 777 fleet delivery schedule stabilises and the 787s come in. Till then it will have to be antique A310s and borrowed 747/777s. (This is why the hint from Praful of "if the airlines want more planes, the govt. will consider it positively". AI is also seriously looking at super-leases -- 7 years.) Even with a combined fleet of 130 planes (a fleet that SHOULD have come 5-7 years ago), a thrashing is quite likely, as "the likes of BA, SQ and EK" have got greater fleet plans. BA is seriously thinking of the A380. EK is pushing the development of a new airport in Sri Lanka to park quite a lot of A380s/and its existing and planned battalion of 777s alongwith a planned new fleet for SriLankan. SQ wants an open skies with India to also push in more of Silkair, Tiger Airways and Valuejet. The Gulf players are increasing (Saudia is planNing a new and mega LCC.)


LEGAL, stamp duty, HR and financial issues are another HUGE headache. 


Merger talk is in reality to boost the IPO, and then go in for possible (part) disinvestment later (depending on the political climate). Right now its Aam Aaadmi.


 



 


 






















-- Edited by karatecatman at 17:45, 2006-11-28

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Interesting to see the reactions after the latest development of a new panel:


Foreign press calls it a setback and a delay


Indian media calls it either a step forward in the giant plans or further fasttracking!!  



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I think the foreign press was being overly optimistic if they thought that the Group of Ministers would come out with a decision. This is India after all, and no minister worth his salt wants any of the eventual blame to rub off on them. Hence the move to get a group of secretaries to look at the details and come back with the answer. I wonder if Ajay Prasad is part of that group - that will certainly help push things forward.

I feel this is a step forward, and you have the govt discussing/debating (hopefully) the merger in a time bound manner.

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The expansion of 9W and IT are in part limited by the GOI and its dog in the manger attitude to the Gulf routes.  Since AI and IC don't have enough aircraft, lets prevent other Indian carriers from benefitting from these routes, and give the likes of EK and Air Arabia etc. market power.


Its the typical Indian attitude of venality towards one's fellow Indian, an attitude that allowed the East India Company to stomp all over the subcontinent in the first place.


Stupid babus.



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Indian, AI merger may get income-tax relief
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The official version: Supports what was posted earlier.


All didn't go well


http://www.thehindubusinessline.com/2006/11/30/stories/2006113006400100.htm
Indian, AI merger may get income-tax relief
Ashwini Phadnis


Group of Ministers raises questions on way forward 


New Delhi , Nov 29


In a move that will smoothen the proposed merger of Indian and Air India, the Finance Ministry has indicated that it would consider favourably the request of the Ministry of Civil Aviation to provide income-tax relief under section 72 A of the Act for the proposal.


The provision deals with carry-forward and set-off of accumulated losses and unabsorbed depreciation in amalgamation or demerger cases.


Both Air India and Indian have accumulated losses on their balance sheets.


"The proposed I-T relief will apply only to the merger of Indian and Air India and will not be applicable to the merger of other airlines in the domestic sector as yet," a senior Government official told Business Line.


Meanwhile, at the first meeting of the Group of Ministers on Monday, divergent views emerged, though no one explicitly opposed the merger.


According to sources, a senior Cabinet Minister said that what was being planned was not a merger but integration of the two airlines to create a behemoth that would face problems on several fronts, including human resources.  (Pranab Mukherjee and A.K Anthony)


Another Minister is said to have questioned the timing of the proposed merger. (Ambika Soni and Pranab Mukherjee)


However, the Planning Commission is said to have come out strongly in favour of the move after the economic rationale was explained at the meeting. (Montek Ahluwalia)


Emerging from the meeting, the Minister for Civil Aviation, Mr Praful Patel, had admitted that several issues were yet to be addressed.


However, he added that there were no dissensions at the meeting.


Meanwhile, the process for setting up a Committee of Secretaries has begun.


The committee would look into various issues raised at the meeting and report back to it within two weeks.


The Cabinet Secretary is expected to constitute the panel soon, sources said.


The proposed merger would provide a host of benefits including giving the new entity a combined fleet strength greater than that of Emirates or Singapore Airlines.


 &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&


http://timesofindia.indiatimes.com/NEWS/India_Business/Tax_waiver_to_aid_AI-IA_merger/articleshow/644127.cms
 Tax waiver to aid AI-IA merger
Byas Anand
[ 29 Nov, 2006 2359hrs ISTTIMES NEWS NETWORK ]
 
 
RSS Feeds| SMS NEWS to 8888 for latest updates


NEW DELHI: The mega marriage in the Indian skies seems set for a smooth take-off. As part of efforts to smoothen the proposed merger between Air India and Indian Airlines, the finance ministry has agreed to offer the deal special income tax relief under section 72A of the I-T Act that deals with carry forward and set off of accumulated losses and unabsorbed depreciation in amalgamation or demerger cases.


Besides, North Block has also indicated that efforts would be made to seek stamp duty waiver for the transaction, which would mean a saving of close to Rs 300 crore. "Since it's a merger between two state-owned companies, the government feels that such relief’s can be offered to this transaction," an official said.


The section 72A relief, available to banks, will be extended to merger between the two state-owned aviation behemoths as a special gesture, government officials said.


Accenture whose report forms the basis for the merger exercise had recommended various options keeping in mind the tax implications. In case the merger is finalised, the tax benefits are expected to be provided in the budget.


The sops will help the new entity take credit for IA's accumulated losses of around Rs 1,000 crore. Sources said similar relief’s would not be extended to mergers in the aviation industry. "It will apply only to merger of Indian and Air India," the source said.


The indications for this tax relief was given by finance ministry at the recently-held group of ministers (GoM) meeting, which has appointed a committee of secretaries (CoS) to iron out the legal issues and matters relating to stamp duty waiver.


At the first GoM meeting held on November 27, the members were largely in favour of the merger though a few questioned the urgency and the model being proposed. "Some members felt that the current proposals only meant joining the two airlines to create a single entity, and the move was not in the true spirit of a merger. They felt that no thought has been given to the integration of the two airlines and value addition from the deal," a source said.


Sources said while a cabinet minister said the merger would create a behemoth that would face problems on several fronts including HR, another questioned the timing of the merger.


The Planning Commission, however, rallied in favour of the merger after the economic rationale was explained at the meeting. 
 



-- Edited by karatecatman at 12:16, 2006-11-30

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RE: AI and IC merger-Inside Talk
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http://www.business-standard.com/economy/storypage.php?leftnm=3&subLeft=1&chklogin=N&autono=266190&tab=r
A-I, Indian merger to create behemoth
 
P R Sanjai / Mumbai November 28, 2006 
 
 
If the government merges Air-India with Indian, the new entity will be powerful enough to close in on the big boys of aviation like Singapore Airlines, Malaysian Airlines and Emirates.  
 
Besides having a fleet of 120 aircraft, the proposed entity will have a workforce of 33,000, a combined turnover of $4 billion and control over 70 per cent of the real estate at airports (like parking bays, hangars and maintenance slots) in Mumbai and Delhi. 
 
“The merged entity will have 120 aircraft in the next three years as part of the current acquisition plan. With an initial public offer following the merger, the airline may go for further expansion,” a source said. 
 
In the next three years, the merged entity will be able to compete with leading carriers in Asia like Emirates, which has over 93 aircraft, Singapore Airlines (118) and Malaysian Airlines (110). It will also give tough competition to its domestic rival Jet Airways. 
 
Air-India now has 15,500 employees while Indian has 18,000. “Though the merged entity will be over-staffed, the expansion in the fleet from 90 to 120 will absorb the surplus human resources,” sources said. 
 
Industry analysts said the ideal employee-aircraft ratio for carriers was around 250-300, the range that the merged entity would have after the fleet acquisition. 
 
Consultant majors Accenture and Ambit Corporate Finance are advising the government on merger proposals of the two airlines. 
 
The Accenture-Ambit report suggests that the merger will help the entity recapture its lost market share. Air-India’s market share, which was 30 per cent in the 1980s, slipped to 20 per cent while that of Indian went down to 22 per cent from 50 per cent in 2000. 
 
“The merger is happening at a favourable time. Both airlines are acquiring new aircraft, the government is in the process of liberalising the norms for the aviation sector. Plus, the airports of Mumbai and Delhi, two prime cities of the country, are undergoing modernisation,” said Kapil Kaul, CEO, Indian subcontinent and West Asia, Centre for Asia Pacific Aviation. 
 
However, he cautioned, “There should be a comprehensive restructuring for the merged entity followed by partial privatisation.” 
 
According to the Accenture-Ambit report, the merged entity will save 3 to 4 per cent on cost due to sharing infrastructure and route rationalisation. 
 
“The proposed merger will enhance the revenue of the merged entity by Rs 1,200 crore. At present, the revenues of both airlines is Rs 14,000,” sources said. 


 


This reporter seems to forget that the "big boys" have super plans of ther own!!!





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karatecatman wrote:



 


This reporter seems to forget that the "big boys" have super plans of ther own!!!








Based on a miniscule homebase market, i think the so called ''BIG BOYS'' have started staring into the face of reality.........INDIA.


EK doesn't seem to be in a hurry to replace its A346 orders nor is it looking at interim lift to compensate the 2yr delay in EIS of the A380s.



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Panel to finalise blueprint for A-I, Indian merger next week
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Panel to finalise blueprint for A-I, Indian merger next week
SUNNY VERMA & G GANAPATHY SUBRAMANIAM


TIMES NEWS NETWORK[ TUESDAY, DECEMBER 05, 2006 03:23:16 AM]
 


NEW DELHI: The grand plan to merge Air-India and Indian to create a mega-airline is expected to cross a key milestone next week with a committee of secretaries (CoS) clearing the modalities of the much-discussed wedding on the Indian skies.


The CoS, headed by cabinet secretary BK Chaturvedi discussed the merger plan on Monday and decided to hold another meeting to seek clarifications from the managements of both airlines.


The green signal from the CoS would enable the empowered group of ministers (GoM) to approve the merger and seek formal clearance from the Union Cabinet. The CoS considered a presentation by Accenture — the consultant appointed to assist the merger — on the modalities and sought certain exemptions while indicating its in-principle approval to the grand alliance which will create an airline of size rivalling global leaders like Singapore Airlines or Emirates.


Besides Mr Chaturvedi, those who attended the Monday meeting include civil aviation secretary Ajay Prasad, finance secretary Ashok Jha, revenue secretary KM Chandrasekhar, law secretary PK Vishwanath and PSE secretary RC Panda.


Civil aviation ministry sources said the CoS was convinced about the commercial aspects of the merger. This was the first meeting of the committee and one more is expected within a week, they added. The GoM had given the panel two weeks to submit a detailed report.


Various aspects like pooling of human resources would be discussed at the next meeting of CoS, it is learnt. According to sources, the committee is likely to invite chiefs of both Air-India and Indian to the next meeting to provide inputs on the inconclusive aspects.


Apart from the legal and financial issues of the merger, the CoS would also discuss key issues such as branding and headquarters of the merged entity. The impact on financial, commercial and passenger facilitation aspects would also be studied at the next meeting.


Civil aviation minister Praful Patel had earlier said that unresolved issues would be taken up by the GoM after the secretaries provide their suggestions. Prime Minister Manmohan Singh has already indicated his backing for the proposed merger.
 Official sources said the mega-airline to be formed after the merger is likely to adopt a decentralised business model. The merged entity will operate different departments like full service airline, low-cost airline, ground handling, maintenance, repair and overhaul, cargo and other activities as independent profit centres.


There will be a separate CEO for each department and all the CEOs would be represented in the board of the merged entity. The civil aviation ministry has sought permission for A-I and Indian to carry forward unabsorbed depreciation so that the merged entity can set it off against future profits.


Stamp duty waiver has also been sought for transfer of assets to the merged entity and the finance ministry has to take a call on the aspect. 
 


You want to take on the mega airlines like SQ and EK, you have to be privatised first. Someone needs to tell the ppl in Rajiv Gandhi Bhavan this.



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RE: AI and IC merger-Inside Talk
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www.uniindia.com


IA to raise Rs 2400 cr rupee loan
11 Dec, 2006 0000hrs ISTTIMES NEWS NETWORK ]
 
NEW DELHI: The state-owned Indian Airlines is in talks with IDBI to raise Rs 2,400 crore in rupee loan for financing the purchase of ten mint-fresh planes from Airbus, starting 2008.


This will be the first time the airline is seeking rupee financing for aircraft purchase. The move, sources said, will help India reduce the transaction costs. "The airline has got go ahead for rupee financing and is in talks with IDBI, which was among the financial institutions shortlisted for raising funds for its initial aircraft acquisition programme. India is now in talks with IDBI to finalise the terms and conditions," a source said.


Indian, the source said, intends to secure rupee loan to finance the aircraft that are slated to be delivered after 2008. "It had recently tie up loans for the first lot of 10 Airbus jets under its previously agreed 43-aircraft order. The fresh loan is being sought for new aircraft that will be inducted from 2008 onwards," the source added.
IA had secured a loan of $540 million from the German national bank KFW to pay for the delivery of first 10 Airbus planes. The loan, covers those aircraft that It will receive till early 2008.


                                                                   ***


http://www.thehindubusinessline.com/2006/12/11/stories/2006121103180100.htm


Air India to finalise financing aircraft purchase by January
Ashwini Phadnis


New Delhi , Dec. 10


Air India will finalise the structure of financing for its Rs 30,000-crore 68 Boeing aircraft acquisition programme in consultation with the Ministry of Finance and Ministry of Civil Aviation by January.


The airline is examining two options for financing the aircraft acquisition.


The first would entail creation of a special purpose vehicle (SPV) that would purchase the aircraft and Air India and Air India Express would lease them from the SPV.


The second option would see Air India take a loan that would be directly reflected in its books.


Sources said that the option of the airline taking a direct loan was the most preferred one, for a variety of reasons including that Air India would own the aircraft.


In case the airline decides to go in directly for a loan, the mandated bankers would provide funds to Air India with the Exim Bank providing guarantee for 85 per cent of the cost of the aircraft. In addition, the Government would guarantee the loan.


...


The airline will pay the Government a fee of 0.5 per cent of the amount guaranteed, while Exim Bank will charge a one-time exposure fee of three per cent.


Air India is to go ahead with the financing despite the proposed merger with Indian.



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http://economictimes.indiatimes.com/articleshow/780372.cms
Post-merger, separate pilots to man Indian, Air India SBUs
SUNNY VERMA


TIMES NEWS NETWORK[ TUESDAY, DECEMBER 12, 2006 02:38:07 AM]
 
NEW DELHI: The merged corporate structure of Indian and Air India is set to go the Lufthansa way. The merger is being mooted on a decentralised model where the new company will float separate subsidiaries for various operational functions of the airline company. This will include different subsidiaries for full service airline, low-cost airline, maintenance, repair & overhaul (MRO), ground handling and cargo among others.


The broad contours of the new merged entity have been put in place by the committee of secretaries that gave its final recommendation to the merger of Indian and Air India in its meeting on Monday. The broad plans for the new company entails having separate CEOs for each subsidiary that will function as independent profit centres.


The plan also entails doing away with multiple low-cost carriers as they exist today under Indian and Air India. The government is likely to merge the two low-cost subsidiaries — Alliance Air and Air India Express — of Indian and Air India respectively, into one low-cost entity. The low-cost carrier operations will be handled by a subsidiary of the new merged company.


 


....


“The CoS, which met on Monday to discuss the proposed merger, was convinced about financial and commercial aspects of the merger. It has endorsed the idea of forming a mega carrier with a decentralised structure, based on the Lufthansa model where different units, including ground handling and IT, function as independent profit centres under one group,” a source told ET.


The civil aviation ministry has also sought permission for Indian and Air India to carry forward unabsorbed depreciation so that the merged entity can set it off against future profits. Further, stamp duty waiver has been sought for transfer of assets to the merged entity. According to initial indications, the finance ministry has agreed to offer special income-tax relief under Section 72A of the I-T Act to the merger deal. The stamp duty waiver alone is expected to result in savings close to Rs 300 crore for the merged entity.


The CoS, presided over by Cabinet secretary BK Chaturvedi, would now submit its views to the empowered group of ministers (eGoM). The eGoM, headed by external affairs minister Pranab Mukherjee, after considering the CoS report, would finalise the merger of the two airlines. Once the eGoM provides the green signal, the merger would be considered by the Union Cabinet.


Sources said members of the CoS were largely in favour of the merger though a few questioned the urgency and the model being proposed. Besides the Cabinet secretary, other secretaries who attended the Monday meeting were Ajay Prasad (civil aviation), Ashok Jha (finance), KM Chandrasekhar (revenue), PK Vishwanath (law) and RC Panda (heavy industries). Indian Airlines CMD V Trivedi and Air India CMD V Thulasidas were also present in the meeting. 
 



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