Ashwini Phadnis

Low-cost advantage


After the merger of Indian and Air India, the process of having one low-cost State-owned airline to address market needs would be considered.

A clear

picture on the model to be followed is likely to emerge within the next six months.

New Delhi, July 26

The Government is likely to consider the merger of the two low-cost airline subsidiaries of Air India and Indian.

Official sources told

Business Line

that after the merger of Indian and Air India , the process of having one low-cost State-owned airline to address market needs would be considered.

"At present, there are two State-owned low-cost airlines Alliance Air (AA) and Air India Express, which are subsidiaries of Indian and Air India. With the parents merger to be completed within the year, we could look at the merger of the low-cost subsidiaries into one low-cost State-owned airline to serve the market needs," official sources said.

The process began earlier this week with a consortium led by Accenture having been given the mandate to look at various models that could be adopted post-merger of the two State-owned airlines. The Accenture-led consortium was selected last Monday as consultants to draw up a roadmap for the merger.

A clear picture on the model to be followed is likely to emerge within the next six months with the consortium mandated to submit the pre-merger report within 26 weeks, the sources said.

Currently, while AI Express offers 15-30 per cent lower fares on limited international routes that it operates in West Asia and South East Asia, AA operates flights within India. The move would be in keeping with the international trends of several global airlines including Thai Airways International launching low-cost airlines.

The move would also allow the State-owned carriers to take on competition from not only the full service airlines but also international low-cost airlines that have started services to and from India.

(This article was published in the Business Line print edition dated July 27, 2006)
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