The decision of the Government of India to appoint Sunil Arora as the Managing Director of Air India in addition to his present charge of Indian Airlines as its Chairman-cum-Managing Director has offered yet another opportunity to bring about synergy between the two airlines and help the country save millions of dollars which can go a long way in bringing about improvement in the financial health of the two airlines.

It is no secret that the two airlines, over a period of time, have been constantly losing their market share as they have been unable to compete because of their small size and inability to get new planes. The result is that both of them are in the red today and there is no hope of their turning the corner in the near future unless they decide to draw upon each other's strength and take advantage of their compatibility instead of trying to fight for the limited space where some profit can be made, that is the Gulf routes.

The need for merging the two airlines has been debated in the past also, and it was felt that without bringing about such a merger it is difficult for them to become viable. For instance, it is no secret that an undeclared war has been going on between the two airlines for the Gulf routes. While Air India earns its bread and some butter from the Gulf routes, Indian Airlines earns 30 per cent of its total revenue from foreign operations and in their absence it would be in far more trouble. The foreign routes are attractive and the private airlines have been pleading with the Government to allow them to fly atleast on routes where Air India and Indian Airlines are unable to operate for want of capacity. In this process atleast 50 per cent of capacity available to India in terms of bilaterals remain unutilised.

Under the circumstances, the assertion by Sunil Arora that he hopes to bring about synergy between the two airlines sounds like music to the ears of those who wish that the airlines do well. For instance it is no secret that in case the two are merged or get into a mode to work jointly, they can reduce their requirements of new planes considerably. Instead of investing four billion dollars in getting new planes, the two probably will end up saving atleast one billion in terms of reduced requirement. More so, the deals being made by them also will be done on different terms. If the two airlines are looking for 75 to 100 planes they will fall in the category of airlines like Singapore or Chinese who can virtually dictate terms instead of being small players.

In this scenario, hopes are rising as in the absence of privatisation or bringing in a foreign partner in view of the present state of the aviation industry, the merger of the two will become a viable proposition and a start can be made by bringing about synergy between the two. Some synergy does exist at present in the form of Air India maintaining engines for Airbus 300 operated by Indian Airlines and Indian Airlines providing some hub and spoke support to Air India on its international routes by linking Delhi and Mumbai with different stations in the country. But the nature of such operations is very limited. For instance there are many stations abroad where Air India and Indian Airlines are competing against each other instead of working together. Such stations include destinations like Dubai, Sharjah and other stations in the Gulf. They are also flying separately to stations like Singapore and Bangkok. These operations could be combined with flights to countries like China, Australia and Hong Kong. More so the two airlines can also save a lot of money through joint operations . The two airlines, if merged, can easily get rid of atleast one third of their present staff as at present they have the unique distinction of having the highest staff-plane ratio. The number of areas in which they can make savings is a long list. For instance, at present, they have such a variety in their fleet which adds to the cost. An attempt at having commonality of fleet has become the essential part of cost cutting by airlines. An attempt at coordination can make our public sector airlines better prepared to meet the competition from private airlines in the domestic sector and from international players in the international sector. Looking at the size of operations by Indian Airlines and Air India, there is no justification for having two establishments. The sooner they combine, the better it will be as otherwise the stage will come soon when the two will either be privatised or closed down because of the heavy losses being made by them.

As of now two airlines are busy negotiating two mega deals. While Indian Airlines is planning to get 42 planes worth around Rs 10,000 crore from Airbus, Air India is going for 12 small capacity long range planes from Boeing and 10 medium capacity planes from the same manufacturer. These deals are making everyone laugh in the aviation industry as one arm of the Government is paying more for the same type of plane because it had negotiated at prices prevailing two years ago, but could not clinch the deal while the second airline has negotiated in the current year and benefited from the lower prices in the wake of the Iraq war and the SARS epidemic.

All these issues can be resolved if the two airlines were to join hands and prepare a common acquisition programme and use their clout for the benefit of the country and airlines. Many problems facing the public sector airlines will disappear if Arora is able to bring about synergy between the two. The joint fleet planning, joint maintenance and joint marketing can change the scenario and the two airlines which at present are struggling with losses can turn the corner. Agreed that the task of merger is not easy, but a beginning should not be difficult as both carriers have common boards, common chief executives and common owners.