The Big Indian Wedding: Air India and Indian Airlines
Pompous flaunt, nosy relatives, and huge debts are all features of Big Indian weddings and one other event; the merger of Air India and Indian Airlines.
Air India and Indian Airlines were merged into a single entity in 2007.
While the implementation of the merger was abrupt, the idea had been tabled for discussion for decades. It was first brought up by former Prime Minister Rajeev Gandhi in 1984. In 1985, the “National Airports Authority of India”, “Pawan Hans” and “Indira Gandhi Rashtriya Udaan Academy” was set up. Through the set-up of these institutes, the then Prime Minister attempted to strengthen Indian Civil Aviation, and the merger of Air India and Indian Airlines was actively discussed. At that time, Indian Airlines did not carry the same brand as Air India and hence a merger would have meant the dilution of the brand carried by Air India. Citing the aforementioned reason, the idea of a merger was dropped. As the competition grew more aggressively, the idea of a merger was deliberated once again in 2006. Low-cost airlines such as SpiceJet and Air Deccan were taking over the skies. Similarly, there was an advent of foreign airlines in the 2000s. The merger of Air India and Indian Airlines seemed like the only option with some merit to it. However, the pace of its execution was appalling.
Just months prior to the announcement of the merger, both Air India and Indian Airlines placed large orders to expand their fleet. Air India purchased 68 aircraft from Boeing while Indian Airlines purchased 43 from Airbus. Had the entities delayed the purchase by a few months, the merged entity would have bagged a better deal. The unreasonable and abrupt decision-making and execution of the merger leads one to question its legitimacy of it.
On March 19th, 2007, the Union Minister for Civil Aviation Praful Patel announced the merger of Indian Airlines and Air India. Consulting company Accenture drew the plan and conceptualized the merger. Accenture recommended the merger and submitted a suitable plan. The intention of the merger, as per Accenture was to integrate domestic and international footprint, expand consumer base and enable entry into any of the Global Airline Alliances. Through a successful merger, Accenture intended to attain revenue synergy and cost and capital productivity synergy for the two airlines. A savings of 3% to 4% in costs and an increase of 3% to 4% in revenue were predicted to be brought by the merger. However, none of the goals of Accenture’s report were actualized nor were the recommendations implemented.
As a part of the merger, the company National Aviation Company of India Limited or NACIL was established. Air India and Indian Airlines were merged into NACIL. NACIL was included in the Companies Act of 1956. The merged airline was known as ‘Air India’ which carried the Maharajah mascot. Post merge, Air India was equipped with a fleet of more than 110 aircraft. The airline had secured a rank among the top 10 airlines in Asia in terms of its size.
However, even after a few years, the merger remained in a letter, not in spirit. Air India and Indian Airlines were poles apart in terms of their operations, work culture, fleet requirements, services offered, and even their customers. Air India’s customers were loyal fliers. The airline was also a symbol of national pride for the longest time. The fliers of Indian Airlines were different. Any lapse in service on Indian Airlines was not as tolerated as it was on Air India. Furthermore, the merger was during the same period as the 2008 global recession. The fuel prices were increasing which only worsened the situation.
Effectively, after two years of the merger, the entities lacked synchrony and continued to function autonomously.
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