AI-Indian merger will create shareholder value: CAPA

Mumbai, Apr 28 (UNI) The government will succeed in creating an internationally competitive carrier by merging Air India and Indian if it can overcome the challenges that lie ahead, according to Mr Andrew Miller, chief executive of the Centre for Asia Pacific Aviation (CAPA).

Mr Miller, a former Chief Operating Officer of Air New Zealand and the architect of turnaround projects, said the government is in a position to capitalise on previous experience with airline mergers in Britain, Australia and New Zealand.

"The ideal outcome for any merger is that revenue is maximised through built-in synergies and costs lowered through economies of scale," said Mr Miller. "However, many airlines don't manage to achieve this. The Indian government's advantage is that it can learn from previous mistakes in other countries." He said the time taken to complete mergers is often under-estimated, adding that the government must remain conscious of the difficulty of resolving important operational issues. These include the consolidation of duplicated areas of operation and rationalisation of staffing.

Mr Miller said that despite tremendous growth opportunities of India's air travel market, particularly with government policies supporting long-term growth through deregulation, Air India and Indian are currently not well placed to create shareholder value from this situation.

"The carriers are constrained by limited capital, over-regulation and lack of market power. Aside from the serious infrastructure constraints faced by Indian carriers across the board, Air India and Indian will face increased competition in an environment of rising costs. This is not a formula for financial success and the creation of shareholder value." It is better for the government to promote India overseas with one airline and one voice, said Mr Miller while addressing delegates at the CAPA's Middle East and Indian subcontinent aviation and tourism investors' summit.

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