The Hindu Business Line : UB group may offer stake in airline biz to raise funds

Bangalore, June 9 Low cost airline Simplify Deccan is expected to get a new name once the merger with Kingfisher Airlines gets legal sanction even as its parent, UB Group, is now open to offer stake for raising funds.

With losses totalling up to over Rs 2,500 crore from the two airlines, the group now plans to raise between Rs 200 crore and Rs 300 more than what it had planned earlier to fund the growth of the merged entity.

It had earlier planned to raise around Rs 1,000 crore, out of which it had sought to raise debt from ICICI Bank worth Rs 500 crore.

“We are open to various options including offering stake to raise funds,” a senior UB group official told Business Line. He said the group would like to raise maximum funds by offering the minimum of stake. “What is more important is the amount of money we can raise,” the official said. But raising debt for rest of the funds was no longer the first option.

The official said that once the merger gets the legal sanction, the group would be keen to change the name of low cost airline, Simplify Deccan to something which is close to the name of Kingfisher Airlines. “The low cost carrier will carry the name of Kingfisher but will be slightly different as we want to keep the identities of both the airlines separate,” he said.

Fare options

The official said the group will continue to offer both low cost as well as full service options but the name of Simplify Deccan is expected to be dropped fully and part of the name of the low cost offering will have Kingfisher’s name.

The official said the total losses have gone up to over Rs 2,500 crore and with aviation turbine fuel prices going up substantially, it was a major cause of worry for the group. “We are looking at various measures to reduce losses but we will not dilute the individual equity each airline has earned,” he said.

For the third quarter (January – March, 2008), Simplify Deccan’s listed entity, Deccan Aviation’s losses reduced 6.34 per cent to Rs 199.56 crore. But its accumulated losses for the nine months has increased 161 per cent to Rs 643 crore. “We believe that in spite of steep increase in fuel prices, we have been able to reduce our losses which is because of better operational synergy between the two airlines,” the official said.

For the third quarter, total income for Deccan Aviation grew nearly 33 per cent to Rs 607.66 crore. The official said the performance of the airline is expected to improve further once the airline has an integrated IT system for better revenue management and code sharing between both the airlines.