Air India, Indian merger may add Rs 1,200 cr to kitty

RELATED NEWS Air India takes off into 75th Year Indian, AI told to seek staff feedback on merger What's in store for Mumbai Airport? AI Express to Delhi/Amritsar/Dubai & Mangalore/Dubai sector Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

The proposed merger of Air India and Indian, which is to be fully completed within the next 2-3 years, is likely to add around Rs 1,200 crore to the bottomline of the new entity through synergies between the two airlines.

Sources told Business Line that the report prepared by Accenture suggests that there could be a 3-4 per cent saving in costs and increase in revenue that initially could work out to be around Rs 600 crore and progress up to Rs 1,200 crore over the next two-to-three years.

"The major savings would come from route rationalisation, common sales distribution network and booking offices. Besides, the creation of a hub and spoke system would also help cut down on costs and increase the revenue of the merged entity. At this moment it would be difficult to predict which areas of synergies would provide how much additional revenues," sources said.

Increase in profit

The merger would lead to a manifold increase in the net profits with the two airlines reporting a combined net profit of Rs 84.79 crore during 2005-06, sources said. The Accenture report has identified sales and distribution network, fuel procurement, material procurement, passenger amenities, ground handling and parking facilities, among others, as the possible areas in which synergies between the two airlines were possible.

To facilitate the merger it has been suggested that the financial books of both the companies should be merged especially since the shareholders are the same.

contd on page 2...