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| Many Indians think that India is unique. Going by the way our governments fail to get even simple things right, they may well be right. Such incompetence is truly unparalleled. |
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| Consider, for instance, the way in which a whole series of them have been waffling on and on and on, for the last 15 years no less, about merging Air-India(A-I) and Indian Airlines (IA). |
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| Contrast this with the speed with which Air France and KLM merged and you begin to get an idea of how unique our governments really are. Even more mortifying is that while IA and A-I have the same owner, Air France and KLM were two different international airlines. That makes the contrast even starker. |
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| India has still to appreciate that there is a movement worldwide to merge airlines, that is, towards capital consolidation in the airline business. This is because deregulation has resulted in massive fragmentation in the industry. British Airways (BA) and American Airlines have been trying for the last several years to join together. |
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| They have been prevented only by the fear of European regulators that the merger would harm competition. Now BA is talking of a merger with Iberia, the Spanish carrier, and Alitalia wants to join the Air France-KLM arrangement. The Italian government wants to sell a part of its 62 per cent stake . There are dozens of such initiatives about. |
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| This is not surprising. That capital and associated labour had to be consolidated has not been in doubt for the last decade and a half. Deregulation has created global overcapacity and cut-rate airlines are cutting the ground away from under the behemoths. |
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| Air France, for example, needed a FF 22 billion government bailout in 1994, but for which it would have perished the way Swissair did in 2001 and Sabena a few years earlier. KLM had been making losses through most of the 1990s. |
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| But the problem was how best to consolidate. There were all sorts of hurdles: regulatory issues, competition issue, staff issues, valuation, gate-use at airports etc. |
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| The Air France-KLM deal has found a brilliant solution to all of these problems. |
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The two have agreed to create a holding company called Air France-KLM that will have two brands. This is the heart of the solution. So easy and so simple when you come to think of it. The new entity will be Europe
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