`Merger not to result in job losses'

Ashwini Phadnis

Merger options


Air India

merger with Indian

Indian merger

with Air India

Creation of

a holding company

Creation o

f a new company

Status

quo

New Delhi, Oct. 15

The Union Government has suggested that the top brass of Air India and Indian jointly consult with their staff before a final decision is taken on the merger of the two State-owned airlines.

At a meeting here , the Union Minister for Civil Aviation, Mr Praful Patel, asked the Chairman and Managing Director Air India and Indian to jointly meet with senior level management of the two airlines not only to ascertain their views but also explain the human resources and other matters connected with the merger.

The need to specify that there would be no job losses due to the merger was reinforced at the meeting. The airlines have been asked to complete the interaction in time for including the feedback in the Cabinet note that is to be prepared.

Accenture, which is undertaking the task of preparing the road map for merger of Air India and Indian, had suggested five options.

At the meeting the five options put before the Government included forming a new company into which both the existing airlines would be merged, the possibility of each of the airlines merging into one another and status quo being held.

A clearer picture on the route to be followed will emerge soon, when a meeting of the Inter-Ministerial Group is to be held. It has been suggested to the Government that there should be a Group Chairman and Managing Director of the new entity and each operation be treated as a business unit headed by a Chief Executive Officer (CEO).

The practical and financial problems that could arise in bringing about the merger were also highlighted at the meeting.

Tax, the stamp duty that would have to be paid as also human resource issues could hold up the proposed merger of airlines. To get over these problems, it was suggested that since both the companies were Government entities, a waiver could be sought on payment of stamp duty. Besides, it was suggested that the Finance Ministry could be approached to consider allowing aviation under Section 72 A of the Income-Tax law. This provision deals with carry forward and set off of accumulated loss and unabsorbed depreciation in amalgamation or demerger cases.

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(This article was published in the Business Line print edition dated October 16, 2006)
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