Kingfisher Airlines picks up 26 % stake in Air Deccan

No official confirmation yet; but no denials either this time from Kingfisher or Air Deccan.

30 May, 2007:

The Kingfisher-Deccan deal seems to be through with TV channels reporting that Kingfisher Airlines has picked up a 26 per cent stake in budget airline Air Deccan, at Rs 150 per share. An official announcement is expected later in the day.

Reuters reports that Deccan Aviation shares are up by 12 percent at Rs 146.80 and United Breweries (Holdings)--Kingfisher Airlines is a subsidiary--up 10 percent, the maximum daily limit, to 683.80 rupees.

According to Times NOW, Air Deccan will continue as a low-cost carrier and a separate subsidiary, while Kingfisher will remain a luxury, full-service airline. Captain Gopinath will continue to head Air Deccan.

With this deal, Indian skies will be dominated by the biggies alone. Recently, Jet Airways became the No. 1 private airline when it acquired Air Sahara. Air India and Indian Airlines have merged and will soon start operating as under the name Air India from July 15. But with a combined 38% marketshare, the Kingfisher Airlines-Deccan combine will displace Jet Airways from the No. 1 slot.

The cash-strapped Deccan Aviation, which incurred losses of 212 crores in the last quarter, had recently appointed Edelweiss Capital to source $100 million to keep it in business. Apart from Kingfisher Airlines, there have been other bidders, such as Texas Pacific Group, Irelandia Investments and the Reliance-Anil Dhirubhai Ambani group, in the fray.

It will be interesting to see how Deccan Aviation will mesh with Kingfisher Airlines. While Kingfisher enjoys the brand image of a superior, plush airline, Deccan really is bottom-of-the-barrel in terms of service and customer care. There is no synergy in terms of how the two airlines are perceived and what they stand for. Vijay Mallya does not do low cost. So will any major changes be made to make Deccan a respectable albeit low-cost carrier?