Titan's Foray into the Prescription Eyewear Market in India

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According to information posted on IA's website, the increasingly intense competition faced by AI and IA from private and global airline companies, was the main reason for the merger of the two airlines.¹² In addition to helping AI and IA tackle competition, the merger was expected to result in considerable synergies by integrating routes and streamlining overlapping facilities and infrastructure.

Accenture had identified significant potential synergies between the two airlines in the areas of sales and distribution network, fuel procurement, material procurement, passenger amenities, ground handling and parking facilities. According to a report submitted by Accenture in late 2006, the merger could result in a 3-4% reduction in costs, and lead to a revenue increase of around Rs 6 billion initially.¹³

However, the proposed merger was not without its share of critics. Initially there was opposition from the employees of the two airlines as they feared that the merger would result in job cuts. The Aviation Minister, Praful Patel, had allayed their fears and assured the employees unions of the two airlines that employment conditions, wages, seniority and career progression, would largely remain unchanged. He also said that a grievance redressal mechanism would be set up to protect employee interests.¹⁴ The government also indicated that there would be no layoffs.

Despite this, analysts warned that the merger might pose a serious challenge in terms of integrating the employees of the two airlines, especially as they had followed completely different operational methods, before the merger. The two airlines also had different fleet compositions, which might create complications in inventory management, maintenance and repair establishments, and pilot training.

Analysts also felt that the merger should be followed by a thorough overhaul of the operations of the airline. Kapil Kaul, Chief Executive (South Asia) of the Centre for Asia Pacific Aviation, an airline industry consultancy, had suggested "a partial sale of equity through an initial public offer to begin with to help induce professionalism and market dynamics, followed by privatization over the next five years or so."¹⁵

The Indian aviation industry was headed towards consolidation in 2006-2007. Jet Airways had already acquired Air Sahara in April 2007. This had been followed by Kingfisher Airlines acquiring a 26 % stake in Air Deccan in June 2007. The merger of AI and IA following these was expected to bring about more changes in the dynamics of the industry.

Additional Readings and References

1. www.indian-airlines.nic.in
2. www.sebi.gov.in
3. Ashwini Phadnis, "Air India, Indian Merger May Add Rs 1,200 Cr To Kitty," October 27, 2006
4. "Indian-Air India Merger-Aviation Minister Meets Staff," www.dancewithshadows.com, January 19, 2007
5. "GoM Clears Merger of Air-India, Indian; Formal Clearance By March," www.domain-b.com, February 21, 2007
6. "Merged Air India-Indian Revenue Projected At Rs15,000 Crore By 2010," www.domain-b.com, February 22, 2007
7. "Govt Eyes Twin Legal Tracks For Air India, Indian Merger," The Economic Times, February 26, 2007
8. Manika Gupta, "Cabinet Gives Green Signal To AI-IA Merger." The Economic Times, March 01, 2007
9. "Air-India And Indian To Merge, To Enhance Profitability By Over US$133m." www.m-travel.com, March 02, 2007
10. "New Company To Be Formed With Air India, Indian Merger," www.domain-b.com, March 12, 2007
11. "Formalities For Merging IA And AI To Be Completed By July 2007," www.pib.nic.in, May 03, 2007
12. "Patel: Merged Entity To Be Called Air India, Will Be Operational By July 15," www.domain-b.com, May 11, 2007
13. "Merger Process At AI, IA Moving Apace," www.domain-b.com, May 16, 2007
14. "State Carriers To Merge As Air India, Will Operate As The National Airline Company Ltd: Praful Patel," www.domain-b.com, May 22, 2007
15. "First 'Air India' Flight On August 1", Business Standard, May 23, 2007
16. "New Merged `Air India' Will Tap Market In 2008," Business Line, May 23, 2007
17. "Thulasidas Is Cmd of Air India, Trivedi Named Joint Md," www.domain-b.com, May 29, 2007
 

Continued...

12]  "Merged Air India-Indian Revenue Projected at Rs15,000 Crore by 2010," www.domain-b.com, February 22, 2007

13] Ashwini Phadnis, "Air India, Indian Merger May Add Rs 1,200 Cr to Kitty," Business Line October 27, 2006

14] Manika Gupta, "Cabinet Give Green Signal to AI-IA Merger," The Economic Times, March 01, 2007

15] "Merged Air India-Indian Revenue Projected At Rs15,000 Crore by 2010," www.domain-b.com, February 22, 2007