AI, Indian to merge this year: Patel

New Delhi, Apr 4 (UNI) The proposed merger of government-owned Air India (AI) and Indian will take place this year, civil aviation minister Praful Patel said today.

''The government has taken an in-principle decision to merge the two airlines in 2006. There has to be one culture, one company,'' he said.

His comments came to quash recent reports that the government is considering a proposal to set up a holding company so that the two airlines can cease to exist as separate companies and become divisions of the new entity.

Mr Patel said it is absolutely logical to consolidate and optimise the use of assets of both airlines. ''In two or three months, we'll know the road forward.'' The government's move will create a major airline with 125 to 130 aircraft to ward off competition from foreign carriers like Singapore Airlines and Emirates who are significant players in the Indian market.

The new mega airline will have to compete internally as well with new airlines coming up.

Private carrier Jet Airways recently acquired its smaller rival Air Sahara at a cost of 500 million dollars (about Rs 2,300 crore) and dominates over 50 per cent of domestic market share.

In recent years, AI and Indian have been trying to synergise their operations. Both airlines are due to launch initial public offerings (IPOs). Mr Praful said the merger decision could be implemented at the same time as the IPOs.

The government plans to sell 20 to 25 per cent stakes in each carrier to help finance fleet expansion.

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