The Hindu Business Line : Kingfisher-Air Deccan: Different, yet similar

New Delhi/Chennai May 31 Mr Vijay Mallya was the host at a gala event aboard his 95 m yacht the Indian Empress in Monaco last week, a few days before the Grand Prix race. "Kingfisher set the party standard in Monaco," read the headline for a report on the event, on Formula 1's Web site.

Mr Mallya was perhaps celebrating a deal already done - only a fortnight back, his UB Group bought Scottish spirits maker Whyte & Mackay for Rs 4,780 crore - and he may well have been anticipating another one to be signed in the next few days, for a stake in Air Deccan.

Global routes

For Kingfisher Airlines the stake makes a lot of sense.

Both airlines fly similar aircraft - ATRs and Airbus A320s - and both have plans to acquire more Airbus aircraft.

Air Deccan has been nurturing plans of flying abroad - it will be able to fly abroad from next year under an existing rule that requires an airline to be in operation for at least five years before it will be allowed to fly international routes.

But, Kingfisher, which celebrated its second anniversary earlier this month, will have to wait for another three years to start its global services.

Kingfisher is scheduled to take delivery of its first wide-bodied aircraft, an Airbus A340-500, in December this year with another two aircraft joining its fleet in quick succession. These will help it fly non-stop from India to the US.

There are reports that the Civil Aviation Ministry is considering relaxing the criterion to three years of operation to fly abroad. This means that Air Deccan can start its operations immediately. Kingfisher can, through a codeshare agreement with Air Deccan, sell seats on Air Deccan's global flights.

Since both Kingfisher and Air Deccan operate similar aircraft, they will be able to share crew, both pilots and cabin crew. The domestic aviation industry is facing a severe shortage of trained crew. The two airlines will also be able to rationalise routes.

Competition

Kingfisher, according to airline industry experts, will be able to concentrate on the trunk routes and remove its services from the non-trunk routes. More importantly, it will use the Air Deccan brand to counter Jet Airways' low-cost brand Jetlite. Jet Airways renamed Sahara Airlines as Jetlite after acquiring it in April 2007 and positioned it between full-service and low-cost airlines.

Aviation industry experts say the Kingfisher-Air Deccan will help Kingfisher face competition better. For instance, Air Deccan now flies to more airports than Indian, which network will now be available for Kingfisher.

In calendar 2006, Air Deccan carried 58.75 lakh passengers and Kingfisher 27.93 lakh passengers. In comparison, Jet ferried 100.28 lakh passengers and Sahara 28.16 lakh passengers.

Industry experts also say that the unrealistic pricing levels will get moderated and some semblance of rationality in pricing restored. In short, this means that customers will no longer be able to enjoy the low prices that they are now able to get.

Further consolidation in the Indian skies

The Kingfisher-Air Deccan deal is another step in the consolidation that is happening in the Indian airline industry.

Jet Airways' acquisition of Sahara Airlines at Rs 1,450 crore resulted in an airline with 88 aircraft and a combined market share of 42 per cent.

However, the biggest is the merger of the two government-owned carriers - Air India and Indian - with the new airline being named Air India. The merged airline will have a fleet of 117 aircraft - Air India has 47 and Indian 70 - (a mix of Boeing, Airbus and ATRs), excluding those on order by the two.

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