Kingfisher stake sale after making profits

Kingfisher Airlines Ltd, owned by India's biggest brewer, may sell shares to investors after it becomes profitable as it seeks to expand in India and abroad.

"When Kingfisher turns to profit, which we expect to be in financial year '09, that's the time to consider placing Kingfisher equity," Chairman Vijay Mallya said in an interview in London on Friday.

Billionaire Mallya's Kingfisher Airlines, which began flights in May 2005, is betting rising demand for travel in the world's second fastest-growing economy after China, will help it make profits. India's air travel market is estimated to surge sixfold to 180 million passengers by 2020, the government said in April. Turning profitable will help the 51-year old Mallya raise more money from investors.

"We have many options open to us, but parting with equity or diluting UB's stakeholding in Kingfisher will only be at the right price," he said.

Meanwhile, Mallya's UB Group, which owns the airline, will continue to fund the carrier's expansion. Kingfisher, named after the UB Group's best-selling beer brand, operates about 187 flights everyday.

"We at UB group believe we have funded, and will continue to fund, Kingfisher Airlines and its requirements," he said.

Mallya said on August 21 that Kingfisher plans to start flights to the US by April, becoming the first private Indian airline after Jet Airways (India) Ltd to tap the lucrative North American market.

Deccan purchase

In India, it expanded by purchasing a 26 per cent stake in low-fare carrier Deccan Aviation Ltd for Rs 550 crore (about $136 million) on May 31.

Mallya expects to raise UB Group's stake in Deccan to 46 per cent after an offer to buy an additional 20 per cent is completed.

The takeover rules require UB Group to make a public offer to purchase additional stock from the shareholders of Deccan. "It's just a matter of time before Deccan becomes, in fact, a subsidiary company," Mallya said.

UB Group may further increase its stake in Deccan by buying shares in small lots, that won't require the company to make public offers to purchase more stock, he said.

Higher fares

Deccan Aviation, which expects to become profitable in the April-June quarter of 2008, plans to raise fares.

"Just because we are a low-cost model doesn't mean that we must lose money," Mallya said. "We need to cover our costs. If the base costs are high, so be it."

Deccan's average yield per seat is about Rs 2,600 compared with Kingfisher Airlines' average yield per seat of Rs 4,400.

"If we can achieve, let's say, Rs 3,200, we're in profit," Mallya said, referring to Deccan.

Deccan reported a loss of Rs 213 crore in the three months ended March 31 as fuel costs rose and it offered discounted tickets to win customers.