Kingfisher-Air Deccan combine to realize Rs300 crore in operational savings in the first year
02 Jun 2007
For the newly formed partnership, combined revenues in FY07-08 are expected to be in the region of Rs6,000 crore. "We will soon see a net profit in Deccan Aviation. Together, the two airlines account for 50 per cent of the deployed capacity of south India," Mallya said. He also forecast that Kingfisher was expected to make an operational profit in FY08 and net profit in FY09.
Though the two airlines would continue to be run independently, both would work out an optimal route strategy, wherever possible. Though Deccan Aviation would continue with its low-cost business model, Mallya said that consumers could not expect fares at levels where the airlines would end up making a loss. He, however, clarified that there were no immediate plans of raising fares.
According to Mallya, the deal would be funded through borrowings made in UB Holdings. He also mentioned that several investors had shown interest in the aviation business of the UB Group.
Referring to an IPO for Kingfisher Airlines, Mallya said that since the valuation of Kingfisher would be enhanced following the acquisition, he would not be interested in selling the shares of Kingfisher cheap at this stage, and would much rather wait for the right time.
The Kingfisher-Air Deccan combine will be the largest domestic airline in the country with a fleet of 71 aircraft, including 41 Airbus and 30 ATR planes.
According to Capt GR Gopinath, executive chairman, Air Deccan, the combine would cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily flights, connecting 69 cities.
