Air Deccan to raise $100 million from European banks

Mumbai: India's second largest airline, Air Deccan, today announced having signed an innovative deal with Investec Bank, UK, and HSH Nord Bank AG of Germany, to raise $100 million (Rs 450 crore) working capital to help ensure its financial stability and insulate it from the 'turbulence' in the domestic aviation sector.

According to Capt. GR Gopinath, managing director, Deccan Aviation, the airline has received the first tranche under the terms of the agreement with the two European banks.

Under the agreement, Rs 450 crore including an upfront payment would be payable in four tranches spread across 15 months to Air Deccan and the airline has assigned its future aircraft supply contract to a special purpose company, funded by the two international banks.

The first two larger tranches would be received in the first half of this fiscal and the remaining in the next financial year. 

India's first budget airfare airline, with a market share of over 21 per cent, had reported a loss of Rs 340 crore on reported revenues of Rs 1,352 crore for the 15 month period ended June 30.  (See: Air Deccan flies into Rs 340-crore losses and Deccan Aviation expects to break even by FY08).

The airline had said the loss had been on account of the higher fuel costs and addition of five new aircraft and opening of routes. It has set an internal target to reach a break-even level within the next 15-18 months.

The financing from the two banks will help the airline to ensure that its cash flow is maintained to continue its growth phase.