Air India, Indian merger gets cabinet stamp (LEAD)

Mar 1, 2007, 18:00 GMT

New Delhi, March 1 (IANS) The proposal to merge India's two state-owned carriers Air India and Indian Airlines was Thursday approved by the cabinet, paving the way for the creation of one of the world's largest airlines.

'The decision to approve the merger was taken after a prolonged discussion in the union cabinet,' Information and Broadcasting Minister Priya Ranjan Dasmunsi told reporters after a cabinet meeting chaired by Prime Minister Manmohan Singh.

'The merger of the two airlines would enable them to leverage their combined assets and capital better and build a stronger and sustainable business,' he added.

According to him, the proposal for the merger was first sent to a group of ministers (GoM) headed by External Affairs Minister Pranab Mukherjee.

'The Ministry of Civil Aviation and the two airlines will be able to complete all necessary legal and procedural formalities for the merger within 16 weeks,' Dasmunsi said.

Over the next five years, the Air India and the Indian Airlines that now operates under the brand name 'Indian' expect to induct as many as 111 new aircraft and, after the merger, they expect to regain the dominant market share they once enjoyed.

'To be stronger in future this merger is important and we expect the merger to happen by March 31,' V. Thulasidas, chairman and managing director of Air India, had said earlier.

The government will continue to be the sole owner of the entity. However, it will go for an initial public offering (IPO) after getting the necessary approval from the finance ministry, according to officials.

Industry experts said the merged entity will have a fleet size of 125 new generation aircraft by 2010 after new aircraft are added and some of the existing ones are phased out to emerge among the top 30 carriers globally. The turnover will also top Rs.150 billion ($3.3 billion).

At a macro level, experts say the merger between the two state-run carriers will see the beginning of the process of consolidation in the Indian aviation space - the fastest growing in the world followed by China, Indonesia and Thailand.

According to a study commissioned by the Federation of Indian Chambers of Commerce and Industry (FICCI), Indian carriers ferried 25.5 million domestic passengers in fiscal 2006, up 27.9 percent over the previous year, and 22.4 million international passengers, up 15.1 percent.

Till 2003 there were only three scheduled domestic carriers, Indian, Jet Airways and Air Sahara. But today, they are joined by Air Deccan, Kingfisher, Go Air, SpiceJet, Paramount, IndiGo and Indus, with Easy Air, Trans India and Air Dravida awaiting government approval.

© 2007 Indo-Asian News Service