Accenture in its preliminary report presented to AI,IA and Ministry of Civil Aviation has said that the cost savings and revenue appreciation arising out of the synergies between the airlines would be “nearly 3-4% to start with.”
Accenture feels a merger will make the two carriers more competitive
BANGALORE: Accenture, the consultant for the Air India and Indian Airlines merger, in its preliminary report presented to the two airlines and the Ministry of Civil Aviation on October 12 has said that the cost savings and revenue appreciation arising out of the synergies between the airlines would be “nearly 3-4% to start with.”
Sources said the consulting firm has examined “possible synergy in the areas pf sales and distribution, fuel procurement, material procurement, passenger amenities, ground handling, parking facilities and other allied services.”
It is also currently studying the timetable of both the airlines very closely to establish a strong ‘hub and spoke’ network to interconnect Air India’s flights over major Indian gateways. This is likely to result in seamless transfer of passengers from an Indian domestic point to an international destination.
“The preliminary report of Accenture will form the platform for preparing a Cabinet note for the in-principle approval of the government to proceed with the merger,” said an industry source.
According to Accenture, the rationale behind the merger is to protect both airlines from further decline in market share. It has said that the merger would not only consolidate the position of the two carriers but also catapult them amongst the world’s top airlines in terms of passenger numbers, turnover, fleet size and growth.
Since the 1980s, Air India’s market share has steadily moved down from 30% to 19% in 2005. Similarly, Indian’s share in the domestic skies has dipped from over 40% in the 2000 to around 22% today.
The two airlines have been losing market to overseas and Indian domestic carriers, which have been consistently adding capacities. They have lost the advantage over their home skies as mega carriers like British Airways, Lufthansa expanded their route network into India rapidly.
“It is believed that the merger will provide an opportunity to leverage the assets and c apital of both airlines and build a stronger sustainable business in terms of capability and infrastructure. Its combined fleet strength would be higher than many other competitors including Emirates, Singapore Airlines, Malaysian Airlines and similar other carriers in the South East Asia Region,” said a source.
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