A parliamentary committee strongly criticised the decision to merge Air India and Indian Airlines and asked the government to have separate domestic and international airlines under a single holding company.

It also recommended pinning the responsibility on “agencies and individuals” who took such a “whimsical” decision and sought “suitable action” to prevent such “intangible loss” being caused to a state-run company.

Describing the merger as “ill-conceived and erroneous”, the Committee on Public Undertakings (COPU) said, “The root cause of the ills plaguing NACIL (National Aviation Company of India Limited) is the ‘merger’ which was flawed at its very inception and which never really took off.”

In its hard-hitting report tabled in Parliament, the COPU, headed by Congress leader V. Kishore Chandra S. Deo, said the multiplication of losses suggested “something radically wrong either with the projections of the benefits of the merger or with the implementation of the merger.”

It recommended converting NACIL into a holding company under which NACIL-Indian Airlines with its headquarters in Delhi and NACIL-Air India with headquarters in Mumbai would function.

Each of the entities should be headed by a Managing Director who would report to the Chairman of NACIL, it said, stressing that the government should “immediately” work this out.

Asked about a similar recommendation of a holding company and two separate entities for domestic and foreign air services made by the Parliamentary Standing Committee, Mr. Deo said, “This only strengthens our findings. We presented our report with the hope that our recommendations will be met.”

Attacking the Civil Aviation Ministry, the COPU said “having imposed the merger” of the two airlines, it “has shown little initiative in monitoring the progress” and its “failure” in not ensuring continuity of leadership.

While there was “no justifiable explanation for this abrupt haste” to merge the two carriers, it said: “The so-called merger is a kind of marriage between two incompatible individuals having wide variances with hardly any meeting ground.”

Recommending capital infusion to make NACIL credit worthy, it said strict compliance to defined performance benchmarks should be made a precondition to a phased capital infusion.

It took the government to task on route rationalisation saying a disadvantage was caused to the national carrier in allocation of prime commercial routes which favoured not only private airlines like Jet Airways and Kingfisher, but also foreign carriers like the Emirates.

The parliamentary panel asked the Civil Aviation Ministry to conduct a “transparent review” of the entire route and slot allocations to ensure that NACIL was not put at any disadvantage.

Asked about the recommendation for “suitable action” against those who decided to merge the two airlines, Mr. Deo said “accountability has to be fixed. Whoever is responsible has to explain. NACIL is not a personal property. It has to be seen that public money is not misused."

Responding to questions whether formation of a holding company would actually amount to de-merger, he said it was “technically not so as NACIL would remain (as the holding firm) and the two airlines would function under it“.

NACIL should develop “its own Maintenance, Repair and Overhaul service as a separate and professional business unit” which would cater to other airlines also, Deo said.

It should be “exclusively assigned” to carry out ground handling activities as it had experienced workforce and decades of expertise. “Any other avenue may be sought only when it is not in a position to carry out the job."

Making a strong case for protecting the employees’ interests, it said there was “a high level of disenchantment and discontentment” regarding the merger and said their basic incentives be reviewed keeping in mind that they remained loyal to the company and “forced to accept (allowance) cuts."

It recommended that pay and allowances of the staffers of the two erstwhile airlines be merged “with reference to the scales of pay and not based on their designations."

Stressing that no employee should be “placed at a disadvantage at any stage”, it said any cut or advancement should be proportionate to the pay scale and “no unilateral decision” relating to service matters be forced upon the employees. “A consensual approach should prevail.”

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