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Business – India;Air India-Indian merger irrevocable: Ministry

NEW DELHI: The civil aviation ministry on Wednesday said the merger of Air India and Indian Airlines was irrevocable as this was a collective
decision of various government agencies. This is in response to a Parliamentary panel’s recommendation that erstwhile Air India and Indian Airlines operate as separate functional units under the holding company NACIL.

“There is no move afoot for the AI-IA (Air India-Indian Airlines) demerger. The merger was a carefully thought-out process and a collective decision of all agencies of the government of India,” the civil aviation ministry said in a statement.

The department-related parliamentary standing committee on transport, tourism and culture, headed by Sitaram Yechury, had recently slammed the government for merging the two national carriers. It said that merger of the two carriers was done in haste without doing adequate homework and consultations. The committee, which submitted its report last week, has suggested that NACIL be converted into holding company with NACIL-A and NACIL-I as separate functional units.

The parliamentary panel questioned the aviation ministry’s decision to purchase 111 aircraft worth Rs 50,000 crore knowing the carriers did not have equity base to support the ambitious acquisition plan. The committee demanded probe to fix the responsibility for taking such a move which has resulted in a big financial liability for Air India.

The airline has borrowed Rs 22,500 crore to fund its fleet acquisition plan. It has a debt of Rs 16,000 crore on account of meeting working capital requirements on a equity base as low as Rs 145 crore. The airline lost over Rs 5,200 crore in 2008-09, mainly on account of high fuel price, weak passenger demand and cut-throat competition.

A section of parliamentarians, including those from the main opposition BJP, have blamed merger of the two carriers for the huge losses the airline incurred in the last two years. It, however, may be noted that even in 2006-07 (the year before the merger) the two carriers, Air India and Indian Airlines, had reported a loss of Rs 447.93 crore and Rs 240.29 crore, respectively.

In the succeeding financial years, the merged entity’s loss multiplied as the global economic downturn hit the aviation sector. Not only the national carrier, most of the bigger carriers have also recorded losses with respite coming only in the quarter ending December 2009.

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January 28, 2010 - Posted by | Uncategorized |

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