Cabinet approves Indian-AI merger

NEW DELHI: The Union Cabinet has approved the merger of state-owned carriers Indian and Air-India. The merger is likely to be completed in four months and the combined entity will have a new name.

Addressing reporters after the Cabinet meeting, Union Minister for Information and Broadcasting Priya Ranjan Dasmunsi said, “The merger will enable the airlines to leverage their combined assets and capital better and build a stronger and sustainable business.”

The minister said it was expected that at the end of the third year of merger, the synergy benefits of approximately Rs820 crore per annum would be available to the merged entity as against the estimated integration cost of Rs200 crore, some of which will be one-time costs.

The potential recurring synergies are expected to enhance profitability by over Rs600 crore, which is 4 per cent of the current combined assets.

A group of ministers, headed by External Affairs Minister Pranab Mukherjee, last month approved a proposal to merge the two state-owned carriers. The merged entity will retain its public-sector character with no dilution of government equity and will have a fleet of over 120 aircraft by 2010-11.