New Delhi: After Kingfisher Airlines announced buying 26 per cent stake in Air Deccan, UB Group Chairman Vijay Mallya indicated fares of the low-cost carrier would go up as no one wants to run on losses.
“It may not happen immediately but we are in business to make profits," Mallya was quoted as saying. Ruling out the possibility of taking a 100 per cent share in Air Deccan, Mallya said: "As of now United Breweries Holdings has picked up a 26 per cent stake and it would make an open offer to acquire a minimum of 20 per cent to all shareholders of Air Deccan at a price of Rs 155 in compliance with SEBI regulations next week."
UB Holdings has made an initial investment of Rs 150 crore in Deccan Aviation and a further investment of Rs 396 crore would be made by this month-end for 26 per cent stake.
The new shares will be allotted at Rs 155 per share, representing around 10 per cent premium of the current market price of the shares of Deccan Aviation.
With this acquisition, the Kingfisher-Air Deccan group will become the largest domestic airline with a fleet of 71 aircraft--41 Airbus and 30 ATR aircraft.
The combined entity will cover all segments of air travel from low to premium fares and offer maximum number of 537 daily flights covering the single largest network in India covering 69 cities, taking advantage unparalled synergy benefits from a common fleet of aircraft.
Mallya said the acquisition would benefit both Kingfisher and Air Deccan to the tune of Rs 300-crore due to synergies the two would enjoy in terms of ground staff, aircraft and maintenance facilities.
This would help in reducing costs and improving profitability, he said. The benefits will be evenly enjoyed by both the airlines, Gopinath said. Mallya said Ramki Sundaram would be the CEO of Air Deccan, while Gopinath would be Executive Chairman. Mallya himself would be the Vice-Chairman.
The Board will comprise of 12 directors, with three directors nominated by the UB group, three from original promoters and institutional shareholders and the remaining six will be independent.
To a question about frequent delays in Air Deccan flights, Mallya said: "Noone has ever heard of Kingfisher flights being delayed and with this acquisition, the situation will only improve."
Also, the reasons for delays were manifold like weather, congestion and handling facilities and at times, delays were due to factors beyond the control of the airline, he said.
Gopinath added Air Deccan was not providing seat numbers to reduce the turnover time of its aircraft, which was perhaps one of the lowest in the world at 15 minutes for ATRs and 25 minutes for Airbus aircraft.
With the acquisition, in the event of cancellation of flights, passengers will be accommodated in the aircraft of either airlines without any increase in fares.
With inputs from agencies
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