A decision to merge Air India and Indian is likely to be taken in the current fiscal to turn the combined entity into a mega carrier with about 130 aircraft to take on the major global carriers like Singapore Airlines, Emirates and British Airways.

Keeping in mind the global aviation scenario, where such mega mergers have taken place in the recent past, from KLM-Air France and Lufthansa-Swissair to Jet Airways and Air Sahara in India,"it is an absolutely logical proposal to consolidate and optimise the use of the assets of the two public sector airlines," said Civil Aviation Minister Praful Patel.

Maintaining that such a proposal would have to be cleared by the Union cabinet, he said, "this should happen within 2006-07” and added that the two airlines were already attempting to synergise their operations.

Patel said the emergence of Delhi and Mumbai, as hubs of their future operations with most modern world-class airports would help the combined entity to spread its operations having a fleet of 125-130 aircraft.

Asked whether the decision would be taken after the two carriers issue their Initial Public Offers (IPOs), he said both these decisions could be implemented at the same time.

The government expects to offload 20-25 per cent equity in these two airlines through the proposed IPOs.

Responding to a series of questions on aviation-related issues, he said major initiatives would be taken to encourage regional Air connectivity, apart from improving airport infrastructure at 35 selected non-metros.

The Civil Aviation Ministry was considering a five-year holiday on payment of landing, navigation and parking charges to airlines, which would provide regional feed from a single metro in a state with 60-80 seater planes like turbo-props, Patel said.

Such an offer could also be given to those airlines, which would launch operations to a new destination, which so far did not have Air services, he said.

The ministry was also contemplating creation of an essential Air services fund (EASF), which could be used to develop those airports, which have not developed or those, which would require huge investment.

The fund could also be used to cross-subsidise those operators who flew on economically unviable but socially important routes designated category-II or category-III.

There was also a proposal to establish the airports economic regulatory authority to take care of issues like allotting of parking bays, time slots, airport tariffs and other functional and commercial issues.

A Bill to set up the authority would be placed in parliament soon, he said. Patel said all these proposals would form part of the civil aviation policy, which would be placed before the Union cabinet for final approval. To questions on Delhi and Mumbai airport modernisation process, he said the two airports would be modernised within 2009-10, while the Greenfield airports at Bangalore and Hyderabad would be ready by 2007-08.

Asked about the airports and Chennai and Kolkata, he said, "we will take a call on these two airports only after the ensuing assembly elections in West Bengal and Tamil Nadu".

To a question on whether the selected private partners for Delhi and Mumbai airports could change their partners, the minister said, "after their selection, the consortium has been frozen" in accordance with the laid down rules and conditionalities.

On granting of licenses to Persons of Indian Origin (PIOs) to start an airline, he said the prevailing rules allowed only the NRIs to invest and start an airline in the country. "The matter is being considered by some concerned ministries including the home ministry", he said.

To questions on allowing domestic carriers to fly abroad, Patel said there was no proposal to relax the conditions of having a 20-aircraft fleet and five years of domestic operations to allow a domestic airline to fly abroad.

These airlines should also adhere to the route dispersal guidelines by operating on category II and III routes, he said.

Patel also said there was no proposal at present to allow foreign airlines to pick stake in Indian carriers.

He said a core committee had been set up to recommend steps to strengthen the directorate general of civil aviation, grant in more autonomy, streamline its functioning and giving it more teeth. The committee's report was expected in a fortnight, the minister added.

(www.financialexpress.com)