Kingfisher set for 20% Air Deccan open offer

Kingfisher Airlines Chairman Vijay Mallya today said funds are in place to buy an additional 20 per cent stake in Deccan Aviation via an open offer.

He said the company has filed the draft open offer with market regulator the Securities and Exchange Board of India (Sebi).

"Arranging the funds is a pre-condition before going ahead with the open offer," Mallya told journalists on the sidelines of a marketing seminar.

"Accordingly, the funds are in place," he said, but refused to elaborate. Deccan Aviation is the holding company of India's first low-cost airline, Air Deccan. Kingfisher Airlines had bought 26 per cent stake in Deccan Aviation earlier this year for Rs 550 crore at Rs 155 a share.

Buying 20 per cent additional stake at the same price will cost about Rs 420 crore.

Going forward, Kingfisher was open to raising the stake in Deccan Aviation beyond 46 per cent, he said. "We may even consider making Air Deccan a subsidiary of Kingfisher Airlines," he said.

Deccan to remain low-cost Mallya said Air Deccan would continue to operate as a low-cost carrier.

"I believe Air Deccan is an excellent low-cost model, which can be made profitable," he said, adding the airline needed a complete makeover of image and service quality.

To improve the airline's operations, the company has already returned four old ATR aircraft in the last four weeks. The airline still has four old Airbus aircraft in its fleet, which would also be sent back soon, Mallya said.

He also said more investment would be made into Air Deccan's arm that operates helicopters and chartered planes.

Mallya said Kingfisher aims to launch flights to the US by April. "We plan to fly to San Francisco and New York from April 2008," he said.

The airline has already filed an application, seeking the US transport department's nod to operate flights. Mallya said Kingfisher Airlines would fly on Air Deccan's licence to the US if overseas flying norms were not relaxed by next year.

"Air Deccan will be a five-year-old airline in 2008. So even if the overseas norms are not relaxed, we will fly on the Air Deccan licence," he said.

A proposal to relax overseas flying norms is being considered by a ministers' panel as part of the new civil aviation policy. Currently, an airline, which has five years of domestic flying experience and a fleet of 20 aircraft, qualifies to fly abroad.

Deccan Aviation shares today provisionally ended at Rs 133.65 on the National Stock Exchange, down 1.70 per cent from the previous close.