The Hindu Business Line : Deccan Aviation posts Rs 341-cr loss

CAPT G.R. GOPINATH (right), Chairman and Managing Director, Air Deccan, and Mr Mohan Kumar, Director Finance, at a press conference in Bangalore on Friday. - G.R.N. Somashekar

Bangalore , Sept. 22

Deccan Aviation, which owns Air Deccan, has incurred a loss of Rs 341 crore for a 15-month period (April 2005 - June 2006) on a turnover of Rs 1,352 crore.

As of March 31, 2006, its turnover was Rs 921.65 crore while net loss was Rs 230.29 crore. For the quarter ended June 30, 2006, turnover was Rs 430.15 crore while net loss was Rs 110.26 crore. The topline for the first 15 months includes Rs 56 crore from the company's helicopter business.

Declaring the results for the first time since the company was listed on the stock exchange, its Managing Director, Capt G.R. Gopinath, told newspersons that the airline has signed a term sheet to raise $100 million from European bankers for its working capital needs for the next 15 months. The company expects to start making profits by 2008.

robust model

"We have a strong and robust model. We are not running an NGO as some critics have called us. Growth has been very well planned," he said. "The Rs 341-crore loss is in fact Rs 341-crore investment to build the market," he said.

Capt Gopinath, however, admitted that the company did not make money out of selling tickets priced Rs 500 or below that fare. Over a period of three years, its airline sold over 1 million seats of Rs 500 and less.

higher fuel charges

Capt Gopinath attributed losses to higher fuel charges and other input costs and introduction of 20 new aircraft and the addition of 56 new routes during the period. Air Deccan has 34 aircraft and operates to 55 destinations and during the 15-month period, carried 4.4 million passengers.

He said a senior team from Aer Lingus had come on board for revenue management. The team would also focus on reorganising the composition of routes consisting of 75 per cent of mature routes and the rest new sectors.

break even

The company's Director, Finance, Mr Mohan Kumar, said the company would be able to break even when it starts operating 400 flights daily or when its fleet size is around 45 aircraft. He said the fuel cost was around 42 per cent of the total costs, compared with 34 per cent a year ago. The airline was averaging a seat factor of 85 per cent in the peak seasons and the benefits of higher yields on the newer routes accounting for 58 per cent of all routes would start flowing in the next few quarters.

He expected oil companies to reduce the aviation turbine fuel from next month because fuel price had come down to $64 per barrel from $72 per barrel. Mr Mohan Kumar said the $100 million, which would be raised from bankers, would be utilised for working capital requirements and it would be sufficient `even in the worst case scenario.' The airline paid a total rental of around Rs 475 crore for aircraft leasing during the 15-month period.

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