//A-I Express, Alliance to be merged as low-cost entity

A-I Express, Alliance to be merged as low-cost entity

Consultant will examine project viability
 
SAGAR MALVIYA & NEELASRI BARMAN,  Friday, May 12, 2006 at 0000 hours IST

MUMBAI, MAY 11:  The panel formed to look into the merger of Air-India (A-I) and Indian-Airlines (IA) is exploring the possibility of floating a subsidiary for low-cost operations by merging Air-India Express, the low-fare arm of A-I with Alliance Air, the decade-old wholly-owned subsidiary of IA servicing tier II cities. This could mean that India would have its first-ever low-cost carrier (LCC) having both domestic and international operations.

Air-India chairman and managing director V Thulasidas told FE , "There is no point floating a separate LCC altogether. As a low-cost option, Alliance Air and A-I Express will join together to form a subsidiary airline."

However, the consultant, to be appointed shortly, will examine the viability of the project.

On the rationale of merging both subsidiaries, Mr Thulasidas said, "The basic idea is to have a primary carrier based on our existing model and also a low-cost airline which can fly both domestic and international routes, post-merger." Industry experts opine that if ever a low-cost carrier model becomes a norm in the future, the merged entity should not be found unprepared. Hence, the platform for an LCC is being contemplated already.

At present, Alliance Air operates mainly in tier II cities like Rajkot, Agartala, Shillong, Visakhapatnam and Raipur, while Air India Express caters to the lucrative Gulf region and is planning to fly South-East destinations.

An Alliance In The Air
• The move will result in India having first-ever low-cost carrier having both domestic and international operations
• Alliance Air operates mainly in tier II cities and is plagued by ageing fleet and declining market share
• Air-India Express has an average passenger load factor of 90%
An analyst with a leading brokerage firm said, "If the merger of Air-India Express takes place with Alliance Air, then that can also become a successful model. The low-cost arm would facilitate travel from tier II cities in India to Gulf and South-East Asian countries.

While Air-India Express is showing a strong performance with an average passenger load factor of 90%, Alliance Air is plagued by ageing fleet and declining market share.

Centre for Asia-Pacific Aviation (CAPA) chief executive officer (Indian subcontinent & Middle-East) Kapil Kaul, however, differs, "The issue of merging the subsidiaries is inappropriate at this point of time. Air-India-Indian-Airlines merger should be the top priority."

http://www.financialexpress.com/fe_full_story.php?content_id=126772