Deccan puts expansion on slow track

With its net worth eroded by half, Air Deccan, India's largest low-cost carrier, has decided to slow down its expansion plans.

"From January to July next year, Air Deccan will go slow on aircraft acquisition and on expanding its network. We will focus on consolidating the existing sectors," Warwick Brady, chief operating officer, Air Deccan, told Business Standard.

With a loss of Rs 340.55 crore for the last financial year, Deccan Aviation, the company that runs the airline, has chalked out a three-pronged strategy to return to profits.

Apart from slowing its expansion plan, the company has decided to go for sale and lease back of aircraft and will also cut down maintenance and repair costs.

"We have made a sale and lease back agreement with UK-based Pegasus Aviation for two aircraft and have posted a profit of $4 million," Brady said.

In addition, Air Deccan has entered into a sale and lease back agreement with Rolls-Royce Partner Finance for two spare engines, resulting in a profit of $1 million. Further sale and lease back agreements would depend on market conditions, he added.

The airline is also planning to cut down its maintenance and engineering expenses. According to Brady, the airline has entered into an agreement with German aircraft maintenance major Lufthansa Technik to support its fleet of 14 Airbus aircraft for a contract valued at more than $150 million.

"This contract is cheaper by $60 million compared with the former maintenance contract. ATR is setting up an engineering base in Bangalore this month and this will take care of our ATR fleet's engineering requirements," he said.

"We are expecting 35 per cent of our 96 routes to break even by March 2007. It will take one more year for the others to break even as 56 of the 96 routes are new," Brady said.

Lufthansa Technik will set up a regional pool of spares in India to support Indian operators. Air Deccan's agreement with Lufthansa Technik will facilitate the stocking of all the rotables on the Airbus at the Air Deccan facility in Bangalore.

"Our rationalisation of engineering services will give us the liberty to cut down inventory per aircraft," Brady added.