UB Group Acquires 26% Stake in Air Deccan - More Consolidation in the Skies

From Kingfisher v/s Air Deccan to Kingfisher + Air Deccan- This seems like a story of two good friends who could not be rivals at business! Captain G.R. Gopinath and Vijay Mallya have joined hands. Vijay Mallya's UB Group is buying 26% stake in Air Deccan. The sale is termed as a "strategic financial investment”. What that means for now is that Vijay Mallya does not gain management control of Air Deccan. It would however gain a management role in the low-cost airline. G.R Gopinath will be the executive chairman and Vijay Mallya, the vice chairman of Air Deccan. The future will be interesting to watch the changing face of the pioneer of low-cost airlines in India and the role the man who described his airline's business to be "transport people between 2 places at the lowest cost and nothing more."

Launched in August 2003, Air Deccan has come a long way. Air Deccan has made flying affordable to the common man. To a business man, it has opened up a new business arena of low cost airlines. Air Deccan exploited an unexplored potential and on the back of it a host of low-cost airlines have mushroomed in recent years. In terms of numbers, Air Deccan hast the largest route network covering over 55 cities with a fleet size of 43. It has a market share of 20% making it the second largest airline in India. All this in a short span of about 4 years is highly commendable. However, the answer to one key question in any business- "Are you making profit?" turns the numbers topsy -turvy. Air Deccan reported losses of Rs. 356 crores in the last financial year. With 22% of the airline owned by the promoters and rest among public- VC funds, FIIs, Individuals including 11% by Lachmandas Ladhani, it seems it became difficult to keep flying without a co-pilot!

On the personal front, I have liked Air Deccan for the prices. My liking ends there. I have had bad memories with flight delays and reschedules. I have failed to understand the concept of "free seating" which only creates confusion and discomfort. When a simple software can churn out seat numbers, why not! I have had to wait for 30 minutes on call to speak to a customer service representative. When I made an attempt to cancel tickets in March, I was told that they have lost data in a system upgrade that included the price of my tickets! It is June and I am yet to get my money. Personal experiences aside, Air Deccan continues to provide the opportunity for many, who never expected to fly once in their life time.

The stage is set for the next phase- Kingfisher-Deccan versus Jet-Sahara combine. On the sidelines is the Air India-Indian merger. All this is immaterial for the common man- this is no end to the party. He can continue to watch for the "Fly at Rs 0" ads on daily newspaper.