Air Transport

The low-cost subsidiaries of Air India and Indian Airlines are likely to be merged once the legacy carriers complete their own consolidation later in 2007, says Air India chairman and managing director V Thulasidas.

Air India's subsidiary Air India Express serves the overseas market, while Indian's subsidiary Alliance Airlines focuses on the domestic market. Thulasidas says they will be merged as part of the consolidation process that the Indian government has been pushing. "The plan is to combine them into one airline that will operate both domestically and overseas," says Thulasidas.

The merger of Air India and Indian, however, may not go ahead by the time the current Indian financial year ends on 31 March. "The decision-making process is under way and the signal must come from the owner, which is the government. The cabinet will have the final say. We expect a meeting next week," says Thulasidas.

Details such as the name of the merged airline, its headquarters - Air India is based in Mumbai and Indian in New Delhi - or its chief executive have yet to be decided. "But it will be a full merger - one company, one chief executive, one board, one strategic business unit for airline operations, low-cost operations, cargo handling and MRO [maintenance, repair and overhaul]," says Thulasidas.

An initial public offering is still on the cards, but it would take place only at a "good time after the merger is completed", he adds. An Air India IPO had been expected in 2008. Air India was also expected to decide on an alliance by December 2007, but Thulasidas says that the decision would be made only after the merger goes through.