Deccan may turn black in next Q1

Air Deccan chairman G R Gopinath today said that he expects the airline to turn profitable during the first quarter of the financial year starting April 1, 2008.

Speaking to reporters on the sidelines of the CII marketing summit 2007, Gopinath said that the airline may also increase airfares, by Rs 500-1000. "Airlines have to increase airfares for profits. Also, we are at a better position to increase fares since we have the lowest costs in the industry," said Gopinath. However, on being asked when the prices would rise, he said, "It might happen tomorrow or three months later as this is totally market driven."

Deccan reported losses of $52 million for the quarter ended March 31, 2007. The net loss for the nine-month period ended March 31, 2007, was Rs 246.50 crore

UB Group Chairman Vijay Mallya said that there was a clear need to improve the service quality of Deccan on criteria such as on-time performance standards, etc.

"Deccan expanded too fast and this lead to certain weaknesses because they did not have a proper back-up," said Mallya. Gopinath said that there were certain constraints which had brought about quality problems but the product had already improved.

The UB Group bought 26 per cent stake in Deccan for Rs 550 crore on May 31 and has offered to purchase another 20 per cent in line with the norms of the Securities and Exchange Board of India (SEBI). According to industry experts, the partnership which would largely be based on resource sharing like engineering facilities would cut aircraft and maintenance costs. According to estimates, the stake purchase would generate savings of around Rs 300 crore in the first year itself.

Air Deccan filled 85 per cent seats in May 2007, compared with 82 percent during the corresponding period last year. Passenger numbers rose by 32 per cent to over seven lakh. The airline has around 350 flights to 65 destinations in the country. Post the successful completion of the open offer, the Kingfisher-Air Deccan group will become the largest domestic airline, controlling 32 per cent market share with a fleet of 71 aircraft, including 41 Airbus aircraft and 30 ATR aircraft. The combined operations will cover all segments of air travel from low fares to premium fares and offer up to 537 daily flights connecting 69 cities in India.