Insight                                                    

Another advantage would be sharing of common infrastructure. There could be sharing of ticketing and booking offices, lounge areas, optimum utilization of hangers, parking bays and slots.

Indian operates most of its flights in day and AI at night. So ones hanger, parking slots etc. can be easily used by the other. Till now what was happening was a fierce and artificial competition between the two airlines, whereas both had compelling reasons to compliment each other.

Now coming to the employee-aircraft ratio. An employee aircraft of 200 is considered good by global standards. Today both Indian and AI exceed this ratio. Post merger and after procurement of new aircrafts the merged entity will have 233 aircrafts which will be taken care off by the same 33000 employees. So the employee to aircraft ratio will come down to 150.

The new entity stands to gain over Rs.1200 crore per year after 3 years of merger. The economies of scale in procurement of materials like fuel, insurance consumable goods and catering will increase profitability in a big way.

Soon after the cabinet approval of merger information and broadcasting minister Das Munshi said “The merger will enable the two airlines to leverage their combined assets and capital better and build a stronger and sustainable business. Aviation experts feel that this mega merger will set the ball rolling for further consolidations in the Indian skies.

Points To Be Taken Care Of

Employee sentiments: Analysts warn that the merger would pose serious challenges  in the months to come especially integrating the 33,000 employees. The employees have certain reservation regarding their job security in the merged entity. Aviation minister has tried his best to assure them that no retrenchments will take place but still the employees feel a bit apprehensive.

Diverse Structure : Moreover, the two carriers have different fleet composition posing challenges for inventory management, maintenance and pilot training. The divergence can be seen through this example – Air India has placed orders for new aircrafts from Boeing, while Indian has done so from Airbus.

Fluid State Of Aviation Sector; Intense Competition : The third point is the fierce competition which aviation sector is witnessing currently. Till 2003, there were only three scheduled domestic carriers namely Jet Airways, Air Sahara and Indian Airlines. But, today the state carriers are embroiled in cut-throat  competition with Air Deccan, Kingfisher, Spice Jet, Go Air, Paramount, Indigo, Indus. Many new airlines like Easy Air, Trans India & Air Dravid are waiting in the wings for government approval. The private players are a force to reckon with. In the last three years, shares of Indian has fallen steeply from 50% to 20%. It is worth mentioning that combined losses by the aviation industries is expected to exceed 0.5 billion dollars in the current fiscal.

What Should Be Done To Allay Fears :  The combined entity could emerge as a potent force only if the merger is treated as a first step and not the last one. The merger needs to be followed through with a thorough overall of operations as suggested by experts.

Kapil Kaul, chief executive South Asia of Centre of Asia Pacific Aviation has recommended a partial sell of equity through an initial public offer to begin with. The industry think-tank Mr. Kaul has suggested privatization of the entity over the next 5 years or so for inducing professionalism.