Air India takes first step towards merger with Indian Airlines

...Invites Expressions of Interest to be consultant

BY A CORRESPONDENT
May 6, 2006

The proposed Air India-Indian merger shifted gears on Thursday, with
Air India issuing an Expression of Interest for appointing a consultant to fulfill the job of preparing a roadmap that will ensure a smooth merger between the two state-owned carriers, by 2006-07.

The advisor will be required to guide the airline through the modalities of the merger, and in addition, help in appointing a separate consultant who would eventually help complete the integration process of the two aviation giants. Tenders will now be invited from M&A specialising firms to appoint the advisor.

Civil Aviation Minister Praful Patel had earlier reiterated the need for the merger, saying that a merged AI-Indian carrier could figure in the top twenty airlines in the world. The merger is expected to be completed within the current fiscal year, and Patel has assured employees of the two airlines that there would be no job losses. He said, "We have to complete the process of merger in the 2006-07 financial year itself. That is the deadline and we cannot keep the issue open."

The IPO issue has not yet been resolved however, with no decision yet on whether two IPOs would be floated, or a single one following the merger. The consultant is expected to provide assistance on this issue, and suggest whether a single or separate IPO would be better in terms of valuation.

Additionally, the consultant will also come to a decision on AI Express, Air India's wholly-owned subsidiary.