Air India, Indian merger will lead to better valuation

The proposed merger of the two state-owned airlines, Indian and Air India, is under active consideration of the government, informed the Minister for Civil Aviation Praful Patel in parliament. If the merger takes off, it is likely to bring in benefits for both the airlines. The merger will put the two airlines in a better and flexible position to raise finance and do capital restructuring. It will also lead to a better valuation of the entity. The enabled merged entity will operate a combined fleet strength which will be the largest in India and comparable to other big airlines in Asia/region. The merger will not only lead to an integrated international/domestic footprint which will significantly enhance customer proposition but will also allow easy entry into one of the three global airline alliances. It will enable optimal utilization of existing resources through improvement in load factors and yields on commonly services routes and help deploy 'freed up' aircraft capacity on alternate routes. The two state-owned airlines will get an opportunity to fully leverage strong assets, capabilities and infrastructure. While it will provide the potential to launch high growth and profitability businesses viz. ground handling services (GHS) and maintenance, repair & overhaul (MRO) to name a few.

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