The proposal to merge Indian Airlines and Air India has been shelved. Instead, a blueprint is being drawn up to create more operational synergy between the two state-owned airlines. A holding company may be set up to oversee the two carriers.
Besides, the 15-member joint board of Indian Airlines and Air India is being restructured, with most of the ex-officio members being changed. Two outside members who are likely to be retained are Ajit Kerkar, chairman of the Taj group of hotels, and SITA Travels chairman Inder Sharma. The size of the board will not be changed.
The joint board will, for the first time, include the chief finance advisor to the civil aviation ministry.
Other members of the board will include the managing directors of the two airlines, a joint secretary to the civil aviation ministry, the Airports Authority of India chairman and the director-general of tourism.
The term of the present board expires in February this year, after which the new board will be constituted.
A senior civil aviation ministry official told Business Standard yesterday: "The proposal to merge Air India and Indian Airlines had found favour with the board in the late 1980s. But then both the airlines were highly profitable organisations." Moreover, at that time, the country's skies were not open.
Former chairman of the joint board, Russi Mody, had staunchly advocated the merger, saying that it was imperative for their survival in view of the increased competition from private and foreign carriers since the open-sky policy came into force.
Mody was of the view that the merger would result in common infrastructure, avoid duplication of flights and reduce operational costs. Indian Airlines and Air India both operate flights to the Gulf countries.
The critics of the proposal cite the example of Vayudoot's merger with Indian Airlines.
The employees of Indian Airlines had objected to it on the ground that induction of Vayudoot's employees would affect the promotion opportunities available to them. Vayudoot's employees had objected on the ground that under the prevalent norms of Indian Airlines, they would have to join at the bottom of a particular cadre.
Civil aviation ministry officials said Indian Airlines did not intend to increase the number of its flight destinations within the country from the present 52, as it did not have an adequate number of aircraft, although negotiations were on for acquiring more. Indian Airlines also flies to 17 international destinations.
With an operating profit of Rs 170 crore in 1995-96, Indian Airlines is poised to break even this year.
