Air Deccan may be acquired by the Reliance-Anil Dhirubhai Ambani group. There is no confirmation of the acquisition news, but it is a fact that Reliance Mutual Fund owned by the Anil Ambani faction of Reliance has been steadily increasing its stake in the Bangalore-based low-cost airline.
Air Deccan, the largest low-cost airline in India with a substantial market share, has been making huge losses and is finding it difficult to keep itself afloat. Air Deccan, owned by Deccan Aviation, wants to raise $100 million to keep flying, for which it is believed to be tapping several investors. It is believed that Anil Ambani's cash-rich Reliance group is willing to pick up a 26% stake in Air Deccan for $100 million. Though there have been several newspaper reports to this effect, there has been no confirmation to this.
Air Deccan has appointed Edelweiss Capital to find investors. Reportedly, Anil Ambani's Reliance, Texas Pacific Group and others have out in bids for the low-cost airline. The Irish airline Ryanair is also believed to be interested in picking a stake in Air Deccan, and has reportedly bid for the low-cost airline through its investment arm Irelandia Investments. Private equity firm Texas Pacific also has interest in the airline business.
In anticipation of a Reliance acquisition of Air Deccan, the Deccan Aviation stock price has been moving up quickly in the last few trading session on the Bombay Stock Exchange. On Thursday, the Air Deccan share price rose 22% on rumors that Reliance and Air Deccan are close to announcing a deal.
Meanwhile, there has also been talk that Vijay Mallya's Kingfisher Airlines may be willing to buy a stake in Air Deccan. Though the acquisition move has been hotly denied by Air Deccan's Captain GR Gopinath, Vijay Mallya has gone on record stating that he is interested in Air Deccan.
There are advantages and disadvantages to any party coming in to bail out Air Deccan. For Kingfisher, this offers synergies since the group is already a performer on its own in the domestic aviation sector though in a different category. An acquisition of Air Deccan by Kingfisher will pitchfork Kingfisher to the No.1 domestic airline position currently owned by Jet Airways. The numero uno slot will give it the freedom to dictate fares and entrench itself in a cutthroat airline market.
However, Kingfisher Airlines is not as cash-rich as it would like to be. Kingfisher Airlines is itself struggling to keep flying without losing margins. The airline wont be comfortable burdening its books with another loss-making airline, even though the Air Deccan acquisition will bring volumes.
For the Anil Ambani group of Reliance, cash is not a problem. Besides diversifying into new sectors, the Air Deccan buyout will give it instant leadership in the low-cost airline business, with the promise of good returns in future. Airline industry being a high cash-burn sector, only the tough stay till the end, and Reliance definitely has the wherewithal to breathe fresh life into the ailing airline. However, the Reliance group has no domain knowledge in managing the airline business, and retaining and finding talent to run the airline will be a key challenge.
Air Deccan operates a fleet of 18 Airbus A - 320 aircraft, with an average age of 1.5 years and 23 ATR Turboprop aircraft. Air Deccan has carried over 8.7 million passengers since inception and the numbers are growing by the day.
Recently, the Tata group picked up 10% stake in the low-cost airline SpiceJet. The Tatas described the SpiceJet stake acquisition as a financial investment and not a strategic one. However, ever since, there has been speculation that the Tata group may use Spicejet for its eventual entry into the airline business. During the early phase of economic liberalisation, the Tata group was keen to enter the airline business, but its plans to form a domestic airline with Singapore Airlines as a partner never took off.
Air Deccan, India's first low-cost airline was started three and half years by GR Gopinath, Army ex-captain turned eco-farmer. The 51-year entrepreneur has run the airline since, making a small regional airline flying turboprops into an airline with the largest domestic network, affordable fares and 22% market share.
The phenomenal growth came at a huge price, as Gopinath rapidly scaled up Air Deccan's operations at the cost of profits. Now, the airline appeals to a large passenger base which has converted from railway journeys and taken to air. However, the challenge is to keep flying, and flying with profits.
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Air Deccan, the largest low-cost airline in India with a substantial market share, has been making huge losses and is finding it difficult to keep itself afloat. Air Deccan, owned by Deccan Aviation, wants to raise $100 million to keep flying, for which it is believed to be tapping several investors. It is believed that Anil Ambani's cash-rich Reliance group is willing to pick up a 26% stake in Air Deccan for $100 million. Though there have been several newspaper reports to this effect, there has been no confirmation to this.
Air Deccan has appointed Edelweiss Capital to find investors. Reportedly, Anil Ambani's Reliance, Texas Pacific Group and others have out in bids for the low-cost airline. The Irish airline Ryanair is also believed to be interested in picking a stake in Air Deccan, and has reportedly bid for the low-cost airline through its investment arm Irelandia Investments. Private equity firm Texas Pacific also has interest in the airline business.
In anticipation of a Reliance acquisition of Air Deccan, the Deccan Aviation stock price has been moving up quickly in the last few trading session on the Bombay Stock Exchange. On Thursday, the Air Deccan share price rose 22% on rumors that Reliance and Air Deccan are close to announcing a deal.
Meanwhile, there has also been talk that Vijay Mallya's Kingfisher Airlines may be willing to buy a stake in Air Deccan. Though the acquisition move has been hotly denied by Air Deccan's Captain GR Gopinath, Vijay Mallya has gone on record stating that he is interested in Air Deccan.
There are advantages and disadvantages to any party coming in to bail out Air Deccan. For Kingfisher, this offers synergies since the group is already a performer on its own in the domestic aviation sector though in a different category. An acquisition of Air Deccan by Kingfisher will pitchfork Kingfisher to the No.1 domestic airline position currently owned by Jet Airways. The numero uno slot will give it the freedom to dictate fares and entrench itself in a cutthroat airline market.
However, Kingfisher Airlines is not as cash-rich as it would like to be. Kingfisher Airlines is itself struggling to keep flying without losing margins. The airline wont be comfortable burdening its books with another loss-making airline, even though the Air Deccan acquisition will bring volumes.
For the Anil Ambani group of Reliance, cash is not a problem. Besides diversifying into new sectors, the Air Deccan buyout will give it instant leadership in the low-cost airline business, with the promise of good returns in future. Airline industry being a high cash-burn sector, only the tough stay till the end, and Reliance definitely has the wherewithal to breathe fresh life into the ailing airline. However, the Reliance group has no domain knowledge in managing the airline business, and retaining and finding talent to run the airline will be a key challenge.
Air Deccan operates a fleet of 18 Airbus A - 320 aircraft, with an average age of 1.5 years and 23 ATR Turboprop aircraft. Air Deccan has carried over 8.7 million passengers since inception and the numbers are growing by the day.
Recently, the Tata group picked up 10% stake in the low-cost airline SpiceJet. The Tatas described the SpiceJet stake acquisition as a financial investment and not a strategic one. However, ever since, there has been speculation that the Tata group may use Spicejet for its eventual entry into the airline business. During the early phase of economic liberalisation, the Tata group was keen to enter the airline business, but its plans to form a domestic airline with Singapore Airlines as a partner never took off.
Air Deccan, India's first low-cost airline was started three and half years by GR Gopinath, Army ex-captain turned eco-farmer. The 51-year entrepreneur has run the airline since, making a small regional airline flying turboprops into an airline with the largest domestic network, affordable fares and 22% market share.
The phenomenal growth came at a huge price, as Gopinath rapidly scaled up Air Deccan's operations at the cost of profits. Now, the airline appeals to a large passenger base which has converted from railway journeys and taken to air. However, the challenge is to keep flying, and flying with profits.
Discuss
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Tell a friend
Bury
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Comments
Air Deccan started, it was an airline with difference, main catch was user friendly website, prompt refund after deducting a nominal part of fare for administration expenses , and a trouble free flight. Even though aggressive expansion made some cancellation and rescheduling issues to the airline
Now it has changed to a problematic airline to the passenger. Once passenger books the ticket there is no refund, only can change sectors for the same person, if he is not finding a suitable travel date during the booking opened period of Air Deccan, the money will be lost. Second thing rescheduling charges of Rs.600 (earlier it was Rs.200)in excess of the fare difference and if the fresh ticket fare is lesser than old one then the difference amount will not be refunded to you.
They are recently changed to much complicated website. A delayed response at all levels of Air Deccan staff.... and there are a hell lot of overbooking issues, airport counter staff won’t allow you to board the plain if there be any kind of misspelling/mismatch happened in the name on ticket and the photo id presented, even though the photo matches… no customer support from their side for resolving such issues. And looks like they want to disallow a certain number of passenger from each flight. The same can be noticed at all counters of Air Deccan. Still you book ticket/ planning to travel on Air Deccan the following points to be noted.
1. Book ticket once you finalize the dates and which should not be changed
2. Be there at the airport to get first boarding pass and on the first bus to board the aircraft
3. Be last at counter may be cost you up to loosing that flight.
4. In any case don't go for refund at any stage, if they cancel ask for alternative flight same/next day.
5. As mentioned manual error, spelling mistakes on the booking not allowed
6. Book Air Deccan if you don't find other alternative options with other airlines.
Taking the above issues in consideration the Air Deccan.. the much hyped peoples airline, which is no more a peoples airline, will be sadly vanished from the tarmac,
The simplicity of Capt. Gopinath’s Simplifly may not help the airline to come out of a $.5 Mn a day loss. If ADAG planning to come to the tarmac to support them with a stake of 26% percent may help the airline to serve India for another year.
Once India Today article a question asked to Warwick Brady COO of Air Deccan to compare Spicejet with Air Deccan, he expressed that operating a fleet of six aircraft is as simple as it can be managed by housewife , but now we can see the net result. who is surviving. and last news he is leaving the airline in months time.
Last year Air Deccan's advertisement was started with ”We have changed”. But we will find they have not changed.
Gopinath, the term of Four Year's is sufficient to adapt with the situations. The people of India may not allow further to grow the airline at their cost. Otherwise you may sit back and change the airline to a really peoples airline with prompt service and value for their money.