Praful Patel holds discussions with employees groups of both Air India and Indian on “Merger”

for Ministry of Civil Aviation | Date - 17-01-2007

As mandated by the GoM for the merger of Air India and Indian in its second meeting held on 15th January, 2007, the Minister for Civil Aviation Shri Praful Patel ,met the representatives of the employees groups of both the public carriers here today. The Secretary, Ministry of Civil Aviation, Shri Ajay Prasad, and the CMDs of the respective airlines were also present on the occasion.

The Minister explained in detail the benefits that would accrue to the airlines post merger, and the collective wisdom behind the entire process. Detailed discussions were held on the HR issues wherein the employees were assured of their future prospects and there apprehensions were duly addressed.

It was explained to the employees that:

Both the airlines would be merged into a new entity . An independent redressal mechanism would be set up consisting of representatives from the Ministry, Airlines, Department of Personnel and Department of Public Enterprises.   This will ensure that the employees grievances, if any, are addressed expeditiously in a fare and credible manner. The selection and appointment of personnel for various responsibilities in the merged entity would be done through a credible and transparent process based on fare and objective criteria. The merger would involve no retrenchment, no cuts or losses in pay scale, perks or allowances.. Fitment of the employees into the new entity would be done in such a  manner that  their  service conditions would further  improve and they would continue to gain.

The overall benefit of the merger of the two airlines were also detailed to the employees which include:

Ø       enabling an integrated/domestic footprint which will significantly enhance customer propositions and allow easy entry into one of the three global alliances;

Ø       enabling optimal utilization of existing resources through improvement in load factors and yields on commonly serviced routes as well as deploy ‘freed up’ aircraft capacity on alternate routes;

Ø       providing an opportunity to fully leverage strong assets, capabilities and infrastructure;

Ø       increased parking bays and landing slots in an ‘infrastructure constrained’ environment;

Ø       increased potential to launch high growth and profitability businesses (Ground Handling Services;  Maintenance, Repair & Overhaul, etc.);

Ø       enabling the merged entity to command better valuation potentially;

Ø       operating a combined fleet strength (~112) which will be the largest in India and comparable to any airlines in the Asia Region  (Emirates (93), Singapore (118), Malaysian (110);

Ø       providing maximum flexibility to achieve financial and capital restructuring through revaluation of assets and cleaning up of financial books.

Thus the merged airline would be in a better position to serve and promote the airport hubs being developed at the metro cities by providing seamless domestic and international air connectivity over these hubs.  At the end of the third year of merger, it is expected that the combined airliner would have the benefit of increased cost savings/profitability of Rs. 820 crore i.e. Rs. 410 crore from revenue synergies (primarily driven by network integration) and Rs. 410 crore from cost and capital synergies (driven by consolidation and better negotiating power) as against integration cost of Rs. 200 crore (HR, rebranding & IT), some of which will be one-time cost.    Hence, the merger is expected to enhance the profitability by over Rs. 600 crore per annum (i.e. 4 per cent of current combined revenue)

The Minister also recalled that on 27th October 2006 the CMDs of both the airlines had sent individual letters to every employee explaining the details of what the merger of Indian and Air India would entail. 

MC/  -Merger

(Release ID :24127)

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