‘Merger pushed AI, Kingfisher Airlines deeper into red’

The merger of Air India with Indian Airlines and that of Kingfisher Airlines with Air Deccan has resulted in a massive increase in their losses, according to official figures.

March 07, 2010 01:45 pm | Updated 01:46 pm IST - New Delhi

A file picture of an Air India aircraft on air. Photo: K. Pichumani.

A file picture of an Air India aircraft on air. Photo: K. Pichumani.

The losses for the National Aviation Company of India Ltd (NACIL), which runs Air India, more than doubled from Rs. 2,226.16 crore in 2007-08 to Rs. 5,548 crore in 2008-09.

Similarly, Kingfisher’s losses rose almost four times from Rs. 408.91 crore to Rs. 1,602 crore during the same period, the figures have shown. The 2008-09 losses for liquor baron Vijay Mallya’s airline were recorded after its merger with low-cost carrier Air Deccan.

Likewise, the combined losses of Jet Airways and its fully-owned subsidiary JetLite or erstwhile Air Sahara rose from Rs. 695.10 crore to Rs. 1,032.7 crore.

Besides merger, very high fuel costs, the global economic downturn and comparatively low yields due to heightened competition also contributed to the rise in their losses, which have been estimated by the International Air Transport Association (IATA) to account for one-third of the losses of the global aviation industry.

But the government has defended its decision for merging the two State-owned carriers saying that the combining their critical mass or size would be a key factor in helping them survive and prosper amid a fierce global and domestic competition.

While Air India planned several cost cutting measures to save Rs. 1,911 crore, it later projected a synergy benefit of Rs. 996 crore over a two-year period.

The official figures showed that an amount of Rs. 503 crore have been realised in the first year of the integration process.

In this background, a Parliamentary Committee recently said that even if NACIL managed to cut costs and generate some amount of revenues, “it may not be able to service the huge liability created due to debt repayment and interest payment” for purchasing a total of 111 aircraft from Boeing and Airbus.

The Standing Committee on Transport, Tourism and Culture, headed by CPI(M) leader Sitaram Yechury, recommended that in such a situation, “the entire aircraft purchase of the NACIL may be funded by the government as soft loan as a one-time measure.”

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