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Air-India, Indian merger: boon or bane?
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Air-India, Indian merger: boon or bane?

Asha Ramachandran
NEW DELHI, Oct. 21. — In the face of the tough stand taken by the civil aviation minister, Mr Praful Patel, employees of the two national carriers ~ Air India and Indian ~ have expressed apprehension over the merger proposal, stating that it may “prove to be the last nail in our coffin”.
Mr Patel has impressed upon the two carriers to meet the competition facing them, stressing that “every person in the organisation will have to understand that these are changing times”.
Stating that the merger, resulting in the Air-India and Indian becoming a single entity, would be in place by the end of this fiscal, the minister took pains to assure that not a single retrenchment was contemplated. “It is in the long-term interest of both the carriers,” he said, adding that questions of seniority would find their way to be overcome.
However, the employees think otherwise. “On paper the blueprint of such a merged entity looks brilliant but, on the ground, whether it becomes a bane or boon for the workforce is a question that needs to be answered by the government,” the Air Corporation Employee’s Union (ACEU) has stated. “We strongly feel that it would tend to add to our woes because on the ground we will be the worst sufferers and far from bringing fortune it may prove to be the last nail in our coffin.”
The ministry is likely to move a Cabinet note on the proposed merger in November after it receives a report from consultancy firm, Accenture. “There are no impediments in the process. Everything is going on as planned,” Mr Patel has said.
The merger of Air-India and Indian would churn out a mega carrier with about 130 aircraft that could take on giants like Singapore Airlines, Emirates and British Airways. The global aviation scenario has witnessed mega mergers in the past few years. KLM merged with Air France, and Lufthansa took over Swiss. On the other hand, the Rs 2,200-crore takeover bid for Air Sahara by Jet Airways, failed and the two sides are now locked in a complicated litigation.
Areas like HR, operations and infrastructure would be looked at in greater detail before the merger proposal is be finalised. A decision on the future of subsidiary organisations like Alliance Air and Air-India Express is also awaited. However, Air-India chairman and managing director, Mr V Thulasidas, was confident that even after the merger, the new airline would continue to operate budget services such as Air India Express.
Admitting to “tremendous amount of leakage that has had been causing us heavy losses”, the ACEU pointed to Indian’s loss of Rs 90 crore in the first quarter of the current fiscal with the second quarter picture being not too rosy either. Mr Patel too referred to this as he said “Personally, I am not happy with the way the two carriers are performing in recent times.”
However, the employees’ union was apprehensive of what it termed a “unilateral decision of merger”, stating that it was oblivious to the conditions of the workforce.
Pointing out that the world over the concept of mega airlines was fast changing the aviation scenario of the world, the ACEU said now was the time when air carriers were redefining themselves as budget carriers, regional carriers and leisure carriers. “Everyone has to redefine themselves in order to airline and low cost carrier and create service business units.”


New entity to up revenue by Rs 1200 cr

P R Sanjai / Mumbai October 20, 2006

The proposed merger of national flag carriers Air-India and Indian Airlines is likely to enhance the revenue of the merged entity by Rs 1,200 crore.


Consultant majors Accenture, with Ambit Corporate Finance, are advising the government on the merger of the two airlines.


“The merger will enable the airlines to enjoy synergy of values which will cut down costs substantially and increase revenue flows, sources close to the development told Business Standard. Apart from integrating operations, a merged entity could have common procurement of materials and fuel and uniform ground handling and insurance procedures, they said.


Stamp duty exposure will be mitigated through legislative sanctions or a government ordinance. There is also a finance ministry proposal to amend Section 72 (A) of the Income Tax Act to provide carry-forward of the unabsorbed loss of depreciation of both Air-India and Indian Airlines.


According to Accenture and Ambit’s first report, the merged entity’s fleet of 120 aircraft would be larger than Emirates’ (93), Singapore Airlines’ (118) and Malaysian Airlines’ (110).


The report suggested that the merger would help the airlines recapture their lost market share. Air-India, which enjoyed a market share of 30 per cent in 1980s, has a market share of 20 per cent today, while Indian Airlines slipped to 22 per cent from 50 per cent in 2000.


“Air-India and Indian Airlines are fast loosing the home sky advantage to international carriers such as British Airways, Lufthansa and KLM,” industry analysts said.


The advisors are working out common guidelines to ensure that employees do not lose out on seniority and the wage structure in the merged entity. Air-India has 15,500 employees, while Indian Airlines has 18,000.

-- Edited by karatecatman at 16:24, 2006-10-22

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