Kingfisher-Deccan merger creates massive airline with even bigger debt

Thursday, 27 December 2007: Full-service Kingfisher Airlines and budget airline Deccan Airlines has just merged to become one of India’s largest airlines as well as one of the India’s largest loss making entities.The new airline will carry with it some INR20 billion in debts. And with the next half year probably requiring around USD250 million for operations, the merged carrier is looking to the possibility of selling shares for a fast cash injection.Kingfisher Airlines’ parent company, UB Group, had earlier in the year purchased a 26% stake in the company. In the last seven months, the group had expanded that stake to now hold 46%.“The merger will be structured in such a way to allow us to carry forward the accumulated losses,” said Ravi Nedungadi, UB group Chief Financial Officer.A spokesperson for Kingfisher has also been reported saying that the airline wasn’t too worried about Deccan’s debts as they were mainly due to investments in future expansions such as training, route expansions and the like.The merger is also beneficial for younger company Kingfisher, who under an Indian law can’t fly services overseas until they have been in operations for over five years.Deccan on the other hand will achieve the five-year goal come August 2008, and as the two airlines have merged, Kingfisher can take advantage of Deccan’s reach. Together the two airlines now will control orders worth 170 Airbus planes. “Deccan will fly to countries that can be serviced using A320 planes and Kingfisher, a premium carrier, will operate the long-range routes with its specialized planes,” he said.

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