The Hindu Business Line : Deccan hopeful of wiping out losses by Apr-Jun 2008

Turnaround plan
The airline expects to effect cost savings of around Rs 150 crore over the next 12 months.
It may pull out of a few routes and recruit less to cut costs.

K. Giriprakash

Bangalore, Nov. 16 Low cost airline, ‘Simplifly’ Deccan has run up accumulated losses worth about Rs 778 crore (as of June, 2007) but it is confident that it will return to profits as early as April-June 2008 quarter.

“Consolidation in the industry is setting in which means airlines will start achieving higher yields and realisation,” Deccan’s officiating Chief Executive Officer, Mr Ramki Sundaram, told Business Line.

The accumulated losses exclude the Rs 253.18-crore loss the airline suffered during the July-September quarter this year. If one takes into consideration the Rs 800-crore debt which the UB Group raised to buy 46 per cent stake in Deccan Aviation which runs Deccan, the owners of the airline have a lot to worry about. But airline officials claim that in another 18 months, accumulated losses will reduce considerably.

What worries the domestic airlines more, according to Mr Sundaram is the sharp increase in oil prices as well as poor airport infrastructure. “If the government stops cross-subsidising, and prices the ATF (aviation turbine fuel) on par with international prices, we will be able to manage our finances much better,” Mr Sundaram said.

Deccan expects to reduce its losses through its initiative to synergise operations with UB-owned Kingfisher Airlines. Over a period of 12 months, the airline expects to effect cost savings of around Rs 150 crore. Sources in the airline pointed out that most of the savings would happen through rationalisation of staff as well as routes.

“We may recruit less while pulling out from a few routes leading to cost savings,” sources said. One initiative which is already underway is the certification of engines of each other’s aircraft by both the airlines.

Another positive news for the airline, according to the sources, has been the improvement in the passenger yield per seat. During the last three months, the difference in the passenger yield has narrowed down from Rs 600 to around Rs 350-Rs 400 per seat. The passenger load factor too has been showing a healthy increase, the official said.

Sources point out that in spite of the lean season, the airline has been able to manage the bucket consisting of various price points. “The easy way out would have been to substantially increase air fares but we have been pretty judicious there,” sources said.