A slow take-off

The synergies from the merger of Indian Airlines and Air-India may take their time coming but come they will.

It's all there on paper. The newly merged entity Air-India, which swallowed up domestic carrier Indian, is legally one company with a single board and chief executive officer. But for all practical purposes, the merger is yet to materialise. Top company executives, however, are confident that slowly but steadily, operations of the two will actually be synergized.

For starters, the next winter schedule will see flights being rationalized and timings changed, especially on common routes. "There are many destinations "� Kuala Lumpur, Kuwait, Bangkok and so on - to which both Air-India and Indian fly and often within half of hour of each other. Such flights will be changed so that they don't compete with each other and one of the flights will be rescheduled to offer another option. This will help load factors for both", explains Ashok Chawla secretary, aviation. Chawla says that in due course the benefits will be more visible and one will see that it is more than a just a "change of name and livery". The message Chawla's trying to get across is that that the merger won't be only cosmetic.

That done, the management hopes to crack the hub and spoke model. The idea is to see to what extent flights of Indian can act as a spoke for AI flights (flying traffic from smaller Indian cities into the metros at such times that the passenger can easily board an Air-India flight leaving for overseas. The challenge would be to ensure that several Indian flights from various cities arrive at roughly a similar time into say, Delhi or Mumbai, gathering traffic to fill up the Air

India wide bodied aircraft). Also on the cards is a merger of offices abroad which would result in substantial savings . To facilitate the changes, the organistion has been restructured into six distinct business units "� the full service airline, a common low cost airline, cargo, MRO, ground service and handling and related businesses, with one functional head for each.

Indeed, some of the benefits of working together are already flowing in. For instance, the new company is able to bargain with suppliers of aviation turbine fuel, now that it's buying a bigger amount. A common IT platform, including a single common call centre, has been designed and will be rolled out in the next 12 months. On the financial front, the accounts of the two carriers and targets for revenue and profits are also being consolidated and should be in place by end October. "We expect the real benefits of the merger only to start flowing in from the next financial year (2009-10)", said S. Venkat, company secretary and director finance for Air-India. Accenture, the consultant spearheading the merger estimates that the profitability of the new entity should go up by Rs 600 crore if the company simply exploits the synergies. But all this could well remain just on paper, experts point out, unless the choice of the CEO is correct (see box).

Of course, even after the amalgamation of the two entities, there are a couple of areas that will stay separate. Since there is little fleet commonality, the engineering and most back - end operations of the two will remain independent of each other. "It will be difficult to integrate the training of pilots, crew, maintenance and engineering of fleets as there are wide differences in the fleet, which will remain," explains a senior executive. That shouldn't really create any problems. In fact, all that matters is that it should all fall into place.