Deccan to leave metro routes for Kingfisher
With Vijay Mallya calling the shots, India’s largest low-cost airline has finally shifted its focus from frenetic growth to making money.
By Nirbhay Kumar, TNN |
NEW DELHI: Call it the Mallya effect. In a bid to wipe off red ink from its balance sheet, India’s largest budget carrier, Air Deccan, is planning to withdraw from all loss-making routes. The new strategy being scripted for the Bangalore-based carrier following its takeover by Vijay Mallya’s UB Group positions it on non-metro routes. The metro routes would be the focus of Kingfisher with its premium full-service model, aiming at improved revenues.
Air Deccan may also reduce frequency on routes like Delhi-Bangalore. At the same time, Kingfisher is expected to go all out on busy sectors like Delhi-Mumbai and Delhi-Bangalore. Air Deccan chief executive Ramki Sundaram told ET: “We periodically evaluate our operations for route profitability and take corrective action against the underperforming routes. However, we can not comment on specific routes as of now.”
According to industry sources, Mr Mallya held a meeting on Monday with Kingfisher and Air Deccan officials and reviewed the route rationalisation process being carried on by the two airlines. He stressed that both ailines should have their focus clearly defined rather than competing with each other. Mr Mallya’s UB Group acquired 26% stake in Air Deccan for Rs 550 crore in June this year.
Rebranding of Air Deccan is likely to take effect from October 15, the sources said. While the airline would be renamed as Simplify Deccan, its livery would also be changed to red –– Kingfisher style. To be unveiled by civil aviation minister Praful Patel, the rebranding is likely to be timed with its route rationalisation plans.
“Air Deccan would stop operation on all the non-performing route by the end of October. It, however, plans to add some new routes, mainly non-metro,” sources close to the development said. Analysts believe that Air Deccan has been losing a large chunk of money on the metro routes because of low fare and high operational cost. “The airline is currently losing substantial money on routes it operates with larger aircraft such as Airbus. It’s only breaking even at routes it serves with ATRs, Centre for Asia Pacific Aviation (CAPA) India head Kapil Kaul said.
Air Deccan posted a net loss of Rs 419.57 crore for the fiscal year ended June 2007. The airline saw 57% increase in net loss to Rs 173.08 crore for the fourth quarter (Q4) ended June 30. The company flies 41 aircraft and has the country’s largest network connecting 65 cities. The airlines’s huge losses are generally attributed to various promotional schemes offering cheap fares and over-capacity deployed on certain sectors.
Air Deccan may also reduce frequency on routes like Delhi-Bangalore. At the same time, Kingfisher is expected to go all out on busy sectors like Delhi-Mumbai and Delhi-Bangalore. Air Deccan chief executive Ramki Sundaram told ET: “We periodically evaluate our operations for route profitability and take corrective action against the underperforming routes. However, we can not comment on specific routes as of now.”
According to industry sources, Mr Mallya held a meeting on Monday with Kingfisher and Air Deccan officials and reviewed the route rationalisation process being carried on by the two airlines. He stressed that both ailines should have their focus clearly defined rather than competing with each other. Mr Mallya’s UB Group acquired 26% stake in Air Deccan for Rs 550 crore in June this year.
Rebranding of Air Deccan is likely to take effect from October 15, the sources said. While the airline would be renamed as Simplify Deccan, its livery would also be changed to red –– Kingfisher style. To be unveiled by civil aviation minister Praful Patel, the rebranding is likely to be timed with its route rationalisation plans.
“Air Deccan would stop operation on all the non-performing route by the end of October. It, however, plans to add some new routes, mainly non-metro,” sources close to the development said. Analysts believe that Air Deccan has been losing a large chunk of money on the metro routes because of low fare and high operational cost. “The airline is currently losing substantial money on routes it operates with larger aircraft such as Airbus. It’s only breaking even at routes it serves with ATRs, Centre for Asia Pacific Aviation (CAPA) India head Kapil Kaul said.
Air Deccan posted a net loss of Rs 419.57 crore for the fiscal year ended June 2007. The airline saw 57% increase in net loss to Rs 173.08 crore for the fourth quarter (Q4) ended June 30. The company flies 41 aircraft and has the country’s largest network connecting 65 cities. The airlines’s huge losses are generally attributed to various promotional schemes offering cheap fares and over-capacity deployed on certain sectors.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
