Deccan Aviation, which runs budget airline Air Deccan, said on Monday it plans to enter air cargo business through a new subsidiary.
MUMBAI: Deccan Aviation, which is floating a fully owned subsidiary to tap the air cargo business, is looking at inducting financial and/or strategic investor in the subsidiary, chief executive G R Gopinath said on Tuesday.
The company plans to begin cargo operations in five to six months with an initial fleet of five ATR aircrafts.
“We are looking at inducting private equity in Air Deccan Cargo by offering up to 49% equity to them,” Gopinath said.
With this, Deccan Aviation, which operates under the Air Deccan brand, becomes the latest to join the cargo bandwagon. Market leader Jet Airways has announced its plans and so has Kingfisher Airlines, which is planning to float its service under King Cargo brand. GoAir has gone on record saying it was considering entering the air cargo segment.
Air India plans to convert two of its 15-year-old A310 planes into freighters in January. In 2004-05, the company earned about Rs 500 crore, or about 10% or its total revenues, from cargo operations.
Blue Dart Aviation, now an associate company of logistics company DHL, is the largest player in the segment. Integrated player operating on the passenger and cargo segment, can push up a fifth of their revenues from cargo operations, analysts say.
For a low-cost airline like Deccan Aviation, the challenge would be to manage higher aircraft turnaround time for cargo operations.
Gopinath said the company proposes to issue 1.9 million equity shares, or 1.9% of post-issue capital, to UK’s Investec Bank on preferential basis at a price of Rs 150 per share.
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