The Hindu Business Line : Deccan puts funding on hold till route rationalisation with Kingfisher

Deccan Aviation, which was set to receive $20 million each during the next two months from a $100-million deal it struck with two European banks, has put the funding on hold till it completes its route rationalisation with Kingfisher Airlines.

Sources in Deccan Aviation, which runs low cost airline Simplify Deccan, told Business Line that the airline is revisiting its fleet acquisition plan because of the rationalisation of routes, which is currently underway with Kingfisher Airlines.

The consulting firm Accenture has been hired to find synergies of operations between the two airlines. It is expected to submit a report in January, which would spell out the road map the airlines have to undertake to turn themselves into profitable entities.

Plans

As per the earlier plan, Air Deccan was expected to add one aircraft each from January to March 2008. The airline currently has 41 aircraft, which includes 22 A320s and 19 ATRs. Kingfisher Airlines is a subsidiary of the UB Group, which owns nearly 46 per cent stake in Deccan Aviation.

Deccan Aviation was expected to receive $20 million each in December this year and January 2008, as part of a $100 million deal with Investec Bank of UK and HSH Nord Bank AG of Germany. Last year, the airline had sold its right of delivery of 60 A320s to these banks to fund its cash flow needs.

The airline has already received $60 million from this deal. An aviation analyst said that if the airline does not receive $40 million funding over the next few months, it could in fact delay the airline’s progress towards profitability.

Its accumulated losses are about Rs 778 crore, which does not include the Rs 253 crore loss it suffered during the July-September quarter this year.

The latest quarter loss, in fact, is its highest recorded loss since its inception.

The airline is hoping that sooner it is able to rationalise its routes as well as its work force apart from effecting cost savings, faster it can emerge as a stronger player in the market.

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