The combined entity formed after the proposed merger of the two state-owned airlines, Air-India and Indian, would go slow on hiring, recruiting only the essential manpower like pilots and cabin crew required to man the new airplanes being acquired.

However, there will be no manpower rationalisation, even though the merged entity would have a headcount of nearly 40,000, much more than that of comparable airlines.

"It would not lead to job cuts," said V Thulasidas, chairman, Air India. The new entity would also look at outsourcing some of the non-core functions to outside agencies. Air-India at present outsources a part of its medical, ground handling and transport services to outside agencies.

The combined entity is likely to have a premium carrier complemented by a full-fledged low-cost carrier covering the entire country as well as several overseas sectors.

This low-cost carrier is likely to be formed by the coming together of Air India's low-cost subsidiary, AI Express, and Indian's trunk route operating subsidiary, Alliance Air. The fate of Hotel Corporation of India, the hotel subsidiary of Air India would be decided by the government later.

"This is a possible direction. This is a reasonable approach also," said Thulasidas on the proposed merger. He however added that the final decision on this will be taken by the government.

Analysts say the move would bode well for the carrier, as it would take forward the dual brand strategy, one brand as a premium airline and another as the low-fare airline.

Besides, this would also help the carrier to integrate domestic and international operations of Air-India and Indian.

Globally, airlines have different products and brands to tap the two segments, as they feel that this would prevent overlapping of products as well as lead to clear demarcation of positioning.

The ground handling and engineering subsidiaries of Air-India and Indian would also be merged. Thulasidas added that after the merger, the new entity would be one of the largest airlines in Asia, with at least 120 aircraft.

"We are among the top airlines in certain categories. We want to be amongst the top five airlines in the region. The biggest draw back is that our fleet is old. The new airplanes would result in improvement in the product quality," he said.

Subsequent to the merger, the new entity would look at joining one of the leading airline alliances in the world.

"Being a part of an alliance has many advantages. First, you would be a part of the global network and then it would also bring in certain standards," he said.

He also said that the US aircraft maker Boeing has had talks with Air-India for a possible joint venture in aircraft maintenance and overhaul area.

Boeing is in the process of finalising an Indian partner for its aircraft repair facility in India.