A 31-member parliamentary panel affirmed last Thursday what most experts in the aviation industry have had long believed?that the decision to merge Air India (AI) and Indian Airlines (IA) was taken due to ?irrational and misplaced? policy decisions of the government. The panel has recommended a probe into the Rs 45,000-crore fleet acquisition plan of AI at a time when the aviation sector was reeling under huge losses due to the economic crisis.
The merger of state-run AI and IA was done in March 2007?the year of M&As in the aviation sector?with the approval of Union ministry of corporate affairs. The loss-making airlines were merged into a single entity, National Aviation Company Ltd (NACIL), in order to achieve two objectives, namely economies of scale and increased leverage. The new merged entity was expected to bring the airline among the world?s top 20 carriers and the largest airline in Asia. The cash-strapped carrier NACIL (with its brand name AI) was losing about Rs 15 crore a day at the last count and posted a loss of around Rs 5,400 crore in 2008-09, which was more than double of that in 2007-08. But can two losers together make a winner? The answer seems to be no, until now.
The committee has recommended that the government atone for its mistake by writing off all of the merged entity?s losses. But is it possible for a government bearing the brunt of a huge fiscal deficit to take such an action? The panel has also suggested letting AI and IA function as two separate functional units. Does that mean that the government will now consider a demand for a de-merger with pressure emerging from some sections within it and from the employees of both the carriers? Some of the officials in the ministry had mooted a proposal in this regard but its fate remains unknown.
The real solution to NACIL?s woes, however, lies in a complete synergetic restructuring of the human resources and aircraft types of both the carriers. They need to merge in a literal sense in both these respects and operate as a single, competitive, commercial enterprise, preferably independent of the ministry of civil aviation.
jaya.jumrani@expressindia.com
