Merger of Kingfisher and Air Deccan Intr – Free download as Word Doc .doc), PDF File .pdf), Text File .txt) or read online for free. This case study is a sequel of the case titled, ‘The First Low Cost Carrier of India’ written by the present author in the year , when the homegrown airline Air. Vijay Mallya bought Air Deccan with his eyes closed. Kingfisher Airlines was once the toast of wealthy Indians who found never-before.
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Strangely, a day after Vijay Mallya announced his plan to merge Kingfisher into Deccan, the budget carrier’s stock fell more than six per cent to Rseven as the BSE Sensex gained Airline experts say Mallya has a tough job on his hands.
Mixing everything in one company doesn’t work. It will have a full-service airline, a no-frills mmerger, plus international operations under one umbrella,” said an airline expert and investor.
History is not on Mallya’s side. Whenever they have tried to merge or work together under one umbrella, they have nearly failed. This, despite the fact that these were subsidiaries, whose operations were independently managed. Ajd don’t like even the smallest deviation,” said a former airline executive who requested anonymity, as he was employed by one of the two decan. In fact, when Deccan planned an inflight magazine to communicate with its customers and earn through advertisinginvestors were paranoid.
It has been seen for many years that it doesn’t work,” said an industry expert. There have been exceptions to the rule.
The inside story of Vijay Mallya’s tumble: He bought Deccan with eyes closed
Jetstar Asia, a no-frills carrier promoted by Qantas, was successful initially, but is now struggling to expand. Experts say the Qantas model worked because Jetstar’s operation was independent.
Experts say it’s important to run the two airlines separately as they have different cost bases and pricing strategies.
But neither Kingfisher nor Jet Airways are 60 years old and the younger an airline is, the easier it is to change its footprint,” Forte said.
Mallya is aware of these challenges. Which is why he’s been trying to blur the differences with the makeover of Deccan.
Given that Deccan acquired its aircraft at a cheaper price than Kingfisher did, it should not be a surprise if Mallya one day says no-frills airlines won’t work in India and we will have just one airline, Kingfisher Airlines. With combined accumulated losses of around Rs 2, crore Rs 20 billionthe new entity created by the merger of unlisted Kingfisher Airlines with Deccan Aviation will have many strengths, but its balance sheet will not be one of them. According to sources, the merged airline will look at equity rather than debt to raise funds going forward.
Vijay Mallya holds While actual numbers are hard to come by for Kingfisher, it is estimated to have lost Rs crore Rs 5.
Experts favour Kingfisher-Air Deccan merger – News18
Inwhen it started its operations, losses were about Rs crore Rs 2. Kingfisher Airlines’ former CFO A Raghunathan, in response to a query some time ago, had said that the airline had got Rs crore Rs 5 billion in equity, loans and guarantees from the group. The group’s backing is a kingfishher for us,” he had said.
Air Deccan, which has been struggling with growing losses ever since it started, is running kintfisher of cash almost as soon as it raises it. As the airline’s losses continued to mount, it was forced to sell a 26 per cent stake to Vijay Mallya for Rs crore Rs 5. The combined entity will also need large capital infusion for the proposed international forays by the two brands.
Jet Airways paid Rs 1, cr to buy the entire airline, in addition to Rs cr paid earlier by Jet as advances and interest.