Indian & Air India merger nears take-off

The group of ministers (GoM) on Monday “broadly approved the merger of Air India and Indian, taking a big step towards materialising the mother of all mergers in the Indian skies. However, the GoM, headed by defence minister Pranab Mukherjee, put off a final decision till human resources (HR) issues are resolved in consultation with the employees of the two corporations. “The GoM in its second meeting on Monday broadly approved the merger, but asked me to talk to the employees and address their issues before a final decision”, civil aviation minister Praful Patel said. Patel said he would undertake a dialogue with the employees of the two corporations within a week and the GoM will meet in a fortnight to give the final go-ahead for the merger, which then can be effected before the beginning of the next financial year.

The GoM, Patel said, endorsed the recommendations of the committee of secretaries (CoS) on the two key issues of income-tax and stamp duty. The revenue department has indicated that it will make the necessary exception under Section 72A of the Income-Tax Act to ensure that the merger of Air India and Indian into a new corporation does not impose a tax burden. On stamp duty payable to state governments on transfer of assets, the GoM noted that the estimated burden of about Rs 50 crore is “well within the merger costs” of Rs 150 crore. “In any case, we will talk to the state governments to lessen the burden,” Patel said, adding that the maximum incidence of stamp duty would be in Maharashtra where Air India has its “most valuable properties”. Patel said he is hopeful of taking the employees into confidence and resolving their issues through a dialogue. “I have already said that the merger will not lead to any job loss. We will ensure that no employee is worse off as a result of the merger,” he added.

Patel said the integration of the operations of the two airlines would be achieved over a period of time of six months to two years. “Immediately, just about 150 key personnel of the two airlines will be integrated to drive the merger process,” Patel said. Even in the case of these personnel, he did not envisage any problem of integration. “The merged entity would have enough room for these senior people.” Patel said the merged entity would have six separate business units dealing with separate functions such as aircraft maintenance, ground handling, cargo, catering services, domestic operations and international operations. The two low-cost subsidiaries of the two airlines - Air India Express and Alliance Airlines - will also be brought under one subsidiary of the merged entity to operate low-cost services.

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