The Hindu Business Line : Kingfisher may fund A380 purchase through IPO proceeds

Bangalore May 10 Kingfisher Airlines may raise funds to buy the world's largest aircraft A380 through a combination of proceeds from an IPO and other private investors.

The first of the A380s are expected to be delivered later this year or early next year.

"No airline can do without an IPO. Sooner or later we have to float one," the Kingfisher Airlines Chairman, Mr Vijay Mallya said.

Shareholders' approval

Mr Mallya said UB Holdings has already sought shareholders' approval for raising up to Rs 6,000 crore through a mix of funding options for acquisition of aircraft and setting up infrastructure for the airline business.

Kingfisher has placed orders for five A380s, which will enable the airline to kick off its international operations.

It will take a call on converting five more A380s on offer to firm orders in June.

The airline also wants to set up a wholly owned subsidiary overseas to carry out its international operations. In case the airline does not receive permission from the Government to start its overseas operations, it will try to ride piggyback on an airline from the US with Kingfisher Airlines' colours.

"If plan A does not succeed, we will have plan B or even a plan C," Mr Mallya said.

He revealed that his company had received a proposal from a major investor early this week and his company officials will hold talks with the investor shortly. Mr Mallya said he will not dilute more than 49 per cent equity in Kingfisher Airways.

"We will continue to hold at least 51 per cent in the airline at any given point of time," Mr Mallya added.

Delay in Delivery

He said Airbus had settled the matter relating to delay in delivery of A380s.

The airline had earlier said Airbus was willing to compensate up to Rs 100 crore because of the delay in delivery. "We have settled the issue to our satisfaction," he said, but declined to give further details.

Airbus is learnt to have settled a similar dispute with Emirates, which is its largest customer for A380s. But no details have been given on the terms of the settlement. Emirates now wants to buy four more A380s apart from 43, which it had already ordered.

The world's largest passenger aircraft, A380 carries a list price of $320 million, which is at least 50 per cent more than the price of any of the existing aircraft. A380 can carry more than 550 passengers and is considered at least 25 per cent cost effective than Boeing 747-800s.

`We are doing better than Air Deccan... '

The UB Group Chairman, Mr Vijay Mallya has said that he was more interested in buying Air Deccan's assets and hence had shown interested in acquiring the airline.

Describing Air Deccan's business model as flawed, Mr Mallya said sale of free tickets and low priced fares were bleeding the airline every day. "The Government should probably award Capt Gopinath the Bharat Ratna for doing public service by giving away free tickets," Mr Mallya said.

Reacting to Capt Gopinath's statement that he will never sell his airline to Mr Mallya, he said Kingfisher Airlines had not borrowed even a single rupee to run the operations. "Those who run an airline on other people's money do not know its value," he said.

Mr Mallya pointed out that his airline owns 28 aircraft and has over 350 flights daily. "Our cost per km is as high as Rs 4,269 per seat," he said. "It is easier for Capt Gopinath to say that he is from Mars and I am from Venus but we are doing far better than them."