The common board of the two state-run airlines, which met in the capital, was scheduled to discuss the formation of a holding company of the two air carriers. The holding company is to be a precursor to a joint balance sheet and the eventual merger of the airlines.

The structure of the holding company will now be discussed at a board meeting in the first week of December. "Some of the board members were absent at the meeting. So when the full board is able to meet in December, the merger of the airlines will be taken up for the discussion," said an IA official.

A report prepared by leading international consultants AF Ferguson on the structure of the holding company will be presented to the board.

IAand AI have failed to see eye-to-eye on the merger in the past. IA's main objection to a merger with AI is the growing loss of the international carrier.

The top brass of IA feel that a merger with a loss-making airline will not help IA's fortunes at this point of time. IA emerged from the red in 1997-98, recording a Rs 47 crore net profit.

The airline has scaled down its profit projection of Rs 90 crore in 1998-99, but still hopes to make a net profit of around Rs 40 crore to Rs 50 crore.

Air-India, on the other hand, has recorded a net loss of Rs 107 crore in the first five months of the current fiscal. Both IA and AI have sought a financial bail-out package from the government.

The staff of IA and AI are also not comfortable with the idea, and are afraid of losing their benefits in the eventuality of a merger.

The 1997-98 balance sheet of IA was submitted to the board of directors on Friday. The board also reconstituted the board of Alliance Air, a fully owned subsidiary of IA.