Air India, Indian Airlines merger to stay

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SME Times News Bureau | 28 Jan, 2010
The government Wednesday rubbished reports of de-merger of Air India and said its merger with Indian Airlines was well-planned and decided collectively by various agencies.

"The merger was a carefully thought-out process and a collective decision of all agencies of the government. We have no move afoot for the Air India-Indian Airlines demerger," the ministry of civil aviation said in a statement.

In 2007, Indian Airlines Ltd, the state-owned carrier that flew largely within the country and Air India, which flew international routes, were merged into one company, the National Aviation Co. of India Ltd (Nacil) which now operates under a single brand Air India.

The Parliamentary Standing Committee on Transport, Tourism and Culture on Jan 21 in its report had slammed the government for merger of Air India and Indian Airlines and said that the decision in this regard was taken in haste.

"The decision was taken in haste, without required homework and consultations. As a result, the entire process has, in fact, been unduly delayed, if not derailed," the Committee had said.

The committee further stated that the merger had given rise to many problems concerning financial, administrative and operational aspects, which could not be foreseen by the people who took this decision.

"The two have inherent contradictions in terms of their human resource and the types of aircraft, which prevented the merged entity from attaining desired economy of scale," it observed.

To prove that Air India was on a growth path, the carrier has further informed that its higher passenger carriage and improved load factor during October-December 2009 has contributed to reduction in its losses by 25 percent from Rs.1,152.44 crore in October-December 2008 to Rs.864.33 crore in October-December 2009.

The net loss also showed a 9.7 percent decline - from Rs.1,632.23 crore to Rs.1,473.85 crore. The airline said it grew 24.8 percent during the period.

Air India carried 3.17 million passengers in October-December 2009, as against 2.54 million in the like quarter the earlier year. Similarly, its load factor rose from 55.3 percent in October-December 2008 to 69.7 per cent in October-December 2009.

NACIL currently has 111 aircraft on order. These include Boeing and Airbus aircraft, of which it has already received 54 so far. While Air India (international) will get 68 Boeing aircraft, Air India (domestic) will get 43 Airbus jets.

The cash-strapped national carrier posted a loss of Rs.7,200 crore last fiscal. The airline, which has been incurring losses since 2004-05, had problems paying salaries to 31,500 employees last year.

The airline, which approached the government for a bailout package, has been assured of an equity infusion of Rs.400 crore by this month-end. But it has been asked to adopt cost-cutting measures and reduce costs by at least Rs.2,000 crore by the end of the current fiscal.