about the Deccan Aviation-Kingfisher merger and its benefits for travellers and investors alike. What is the roadmap to profitability after the merger?
We expect savings of about Rs 300-400 crore annually to accrue because of the synergies achieved due to the merger.
An increase in the revenue through reduction in costs would follow because of the operation of an airline that will have about 600 flights a day.
The resultant negotiation power and costs saved in fuel and maintenance will be the added benefits. We hope to break even in the next fiscal.
What is the expected range for the share swap ratio? Give us some pointers as to how valuation will be done.
The criteria defined for this are laid down by the Supreme Court and will be based on the net asset value, market price and the discounted cash flows, which would be the deciding factors for reaching the ultimate swap ratios.
For this to be achieved in the most transparent way, we have appointed KPMG and Dalal & Shaw.
It is believed that Kingfisher Airlines was keen to launch its international operations on the Deccan flying permit due next year and that is one of the driving forces for the merger. Your comments
What is important for us at this point in time is that the merger has given us a flexibility of going international. It is important for us, but not the sole criterion. What we are looking at is an increase of Rs 300-400 crore in the first six months in the bottom line once we launch the international operations.
Have you sounded out banks to raise capital for the joint business?
We are talking to bankers. There have been some expressions of interest from some private equity partners and merchant bankers. We are looking at raising Rs 25 crore for the combined business and Deccan would be the surviving entity.
What is the likely tax impact and how will the merged entities go about saving tax?
The raison d'etre for demerger of scheduled air services from Kingfisher Airlines into Deccan Aviation is to preserve the tax offset.
How much equity do you plan to dilute in terms of percentages?
We plan to dilute about Rs 1,000 crore to take care of the next 18-24 months' requirements.
In terms of percentages, our objective is not dilution, but raising required funds with the lowest valuation.
Is the timing of the merger correct?
It is the right time for the merger. People say worldwide aviation companies are incurring losses.
But what we are looking at is that the world has changed dramatically and there is a pool of about 2.5 billion people, who are potential fliers in both India and China. Governments are now deregulating operations and private carriers are moving in.
How will you be able to give a competitive edge when mergers across the globe have not been too profitable?
Parallels can be drawn from our acquisition of Whyte and Mackay this year. Both the industries needed consolidation and were highly fragmented, but there have been dramatic changes in that business and we hope to repeat that in aviation too.
We are sure we would be able to deliver and sustain. We would aim to increase revenues on every flight we take. There is a demand for low-cost sensitive fare on the metro routes and drivers of business can be different at different timings.
We are looking at increasing capacity and not pricing. We would generate more revenue through our network strategy and good understanding of the consumers through the assets we have.
