With the stage cleared for yet another grand merger in the booming Indian aviation space, the 'King of Good Times' and business tycoon Vijay Mallya is literally flying high!
BANGALORE: With the stage cleared for yet another grand merger in the booming Indian aviation space, the 'King of Good Times' and business tycoon Vijay Mallya is literally flying high!
The decision to merge his dream airline with low-cost Air Deccan to create India's largest carrier under the Kingfisher brand has come as an icing on the cake. He has now set his eyes on the international market and is raring to fly.
"Apart from synergies, better productivity and lowering operational costs, the merger will enable us to fly overseas from August next, especially across Europe and the US," Mallya said.
"As the Union civil aviation ministry has not relaxed the archaic rule to allow private carriers to fly abroad until they complete five years, we have decided to address the issue by joining hands with Air Deccan," Mallya added.
Two years after floating Kingfisher, Mallya consolidated his presence in the booming yet bleeding civil aviation sector by first acquiring 26 percent stake in Deccan Aviation for Rs.5.5 billion ($140 million) in mid-2007.
He then upped the ante by buying an additional 20 percent through an open offer for Rs.5.7 billion ($145 million) to make his UB Holdings the largest stakeholder in Deccan with 46 percent controlling stake.
With Air Deccan set to complete five years of running a scheduled airline next year, decks have been cleared for Mallya, a Rajya Sabha member from Karnataka, to pilot a budget airline to international skies.
The board of the holding company Deccan Aviation has also approved the merger plan as scripted by global consultancy firm Accenture and will soon help the carriers tap the growing international traffic inbound over few years.
But the decision to merge the two carriers was not entirely a smooth affair as they were earlier waging a proxy war over each other's business models and revenue streams.
Yet, Mallya and Deccan co-founder G.R. Gopinath decided to kiss and make-up due to intense competition from Air India-Indian and Jet Airways-Jetlite - arising out of the previous two mergers - for a greater share of the domestic and overseas markets.
"By merging with Deccan and becoming a single corporate entity, Kingfisher will have an equal right to operate flights on international routes and expand its presence in the subcontinent with a combined fleet of 80 aircraft," Mallya said.
"Kingfisher will fly to far-off destinations in Europe and the US, while Deccan will operate in the Asian and Gulf region, with more flights to Saarc and South East Asian countries," he pointed out.
"This way, we will not only retain our brand entities, but also make optimal use of capital-intensive resources to leverage our respective business strengths."
Post-merger, the listed Deccan Aviation will be re-christened Kingfisher and traded on the stock exchanges after necessary clearances and achieve synergies, derived from common fleet, personnel, logistics and software.
Together, they intend to operate 600 flights a day to about 100 destinations in India and abroad, even as Mallya maintained that he was aware of the head start Jet Airways-Jetlite and Air India-Indian had in commencing overseas operations.
That's the reason why he could not afford to wait for the government to change the rule and let competitors dominate the market till his airlines gets rights to fly overseas from mid-2010, he maintained.
"With newer routes opening up and more destinations becoming reachable, the potential for growth is immense, infrastructure bottlenecks and rising aviation turbine fuel costs notwithstanding."
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