Kingfisher-Deccan merger to facilitate institutional funding

The merged Kingfisher-Deccan Aviation will be one entity by the beginning of the new financial year.

The merger was finalised at a three-hour long meeting of the boards of both the companies in Bangalore today.

Deccan's helicopter chartering business will be demerged, and spun-off into an equal joint venture between the UB Group and C Y Gopinath, who will head and run this business.

The concerns on tax implications (whether the merged entity will be able to set off the accumulated losses of the two airlines against future profits) have been sorted out.

''We understand that if we demerge the scheduled airline business of Kingfisher and merge it with Deccan Aviation, the losses could be protected,'' said UB Group CFO Ravi Nedungadi.

The merger will enable Kingfisher to fly abroad on Deccan's licence, and also enable Mallya to rope in institutional investors and infuse much needed cash to fuel his international foray and sustain domestic operations.

"We will need $200-$300 million in the next 18-24 months,'' said Nedungadi. It wouldn't be surprising if Mallya ropes in big investors by January.