The Indian Government will succeed in creating an internationally competitive carrier by merging Air India and Indian Airlines if it can overcome the challenges that lie ahead, according to Mr Andrew Miller, the Chief Executive of the Centre for Asia Pacific Aviation.

Mr Miller, a former Chief Operating Officer of Air New Zealand and the architect of several successful airline turnaround projects, told the Centre’s Middle East & Indian Subcontinent Aviation & Tourism Investor Summit in Mumbai that the Government is in a position to capitalise on previous experience with airline mergers in the UK, Australia and New Zealand.

“The ideal outcome for any merger is that revenue is maximised through built-in synergies and costs lowered through economies of scale,” Mr Miller says. “However, many airlines don’t manage to achieve this. The Indian Government’s advantage is that it can learn from previous mistakes in other countries.”

He warned that the time taken to complete mergers is often under-estimated, adding that “the Government must remain conscious of the difficulty of resolving important operational issues.” These include the consolidation of duplicated areas of operation and rationalisation of staffing.

Mr Miller noted that, despite the tremendous growth opportunities of India’s air travel market, particularly with government policies supporting long-term growth through deregulation, Air India and Indian Airlines, are “currently not well placed to create shareholder value” from this situation.

“The carriers are constrained by limited capital, over-regulation and lack of market power. Aside from the serious infrastructure constraints faced by Indian carriers across the board, Air India and Indian Airlines will face increased competition in an environment of rising costs. This is not a formula for financial success and the creation of shareholder value. It is better -for the Indian Government- to promote India overseas with one airline, and one voice,” he concluded.

The Centre’s Middle East and Indian Subcontinent Aviation and Tourism Investor Summit, held in Mumbai, features high level participants, including the Hon Shri Praful Patel, Minister for Civil Aviation.