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India to Merge Two Faltering State-Run Airlines


The Indian government has given its approval to a merger between the country's two state-run airlines. As VOA's Steve Herman reports from New Delhi, the carriers have been struggling with competition from private entrants in the booming sector.

Key government ministers gave their consent to a merger between Air India and Indian Airlines, despite opposition from leftist politicians concerned about the welfare of the airlines' employees.

Indian civil aviation officials predict the merger will save more than $150 million annually without any job cuts. The two legacy carriers have been losing money for years, despite a boom in air travel here.

Analyst Kapil Kaul at the Centre for Asia Pacific Aviation says one problem is the age of the airlines' fleets, the oldest in the marketplace. He says, however, 111 new aircraft are on order.

"That is one thing that Air India-Indian Airlines badly needed. This will help them to modernize the fleet and become very competitive," he explained. "But both of them were competing with each other in more than one way, both in the regional-international operations, and Air India didn't support Indian Airlines in terms of feeding traffic."

Indian Airlines traditionally flew domestic routes, while Air India was the international flag carrier.

Less than five years ago, India had only three airlines. There are now 10, including several low-cost carriers.

In terms of passengers, the size of the market is expected to double to 60 million annually by 2010. Even so, the sector is losing money overall. The upstarts have been cutting fares to lure passengers away from each other, and have been investing in more aircraft.

Analyst Kapil Kaul predicts the 10 carriers combined will post losses of about one-half-billion dollars for the fiscal year ending March 31.

The merger of the two state-run airlines is set to start March 31, and industry watchers say the merged carriers could eventually be partly or fully privatized. They also say the industry will probably see further consolidations, and maybe some bankruptcies as well.