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Kingfisher Radio to make open offer for Deccan Aviation

KINGFISHER Radio, a wholly-owned subsidiary of United Breweries Holding, will make an open offer to shareholders of Deccan Aviation, the Bangalore-based low-cost carrier to pick up 27 million shares at a price of Rs 15 5 per share.

The offer, being managed by Edelweiss Capital, is slated to commence on July 25 and will end on August 13. The offer is a consequence of a 26% preferential issue being made by Deccan Aviation to Kingfisher Holdings.
UB Holdings had on May 31 announced acquisition of 26% stake in Deccan Aviation for Rs 546 crore. The company had made an initial investment of Rs 150 crore.

Kingfisher Radio was set up in 1999 to promote and sell media such as satellite, video, television and radio, besides deploying funds by way of investments in assets, properties and securities. The audited accounts indicate that in FY06 Kingfisher Radio had an operating income of Rs 5 lakh with net income of Rs 9,539. The paid-up capital is Rs 5 lakh while the reserves and surplus were a negative Rs 1.35′ lakh while for FY07 the net worth based on (he unaudited financial statement) is pegged at Rs14.49crore.

Jet Airways unveils for Brussels hub

VANCOUVER: Unveiling its plans for the newly-created hub at Brussels, Jet Airways on Wednesday said it would operate five flights a day from India to the Belgian capital and provide seamless connections for onward journey to the US and Canada. The hub would give the airline access to the entire Europe, besides allowing services to North America. It would focus not only on connecting Indian passengers, but also carry traffic fed by Brussels Airlines from Europe and Africa for onward journey to the US and Canada.

Air Deccan slaps congestion cess

IT IS a way of showing who calls the shots. Air Deccan, the country’s largest low-cost carrier, in which liquor king Vijay Mallya took 26% stake last week for Rs 550 crore, re-imposed the congestion cess of Rs 150 per passenger from Tuesday.

This is the first in a series of measures the UB chief is likely to introduce in the coming weeks to turn around Air Deccan. “We have decided to focus on making Air Deccan’s operations profitable this year and this may involve taking some hard decisions,” a senior UB Group executive told ET. Imposition of the Rs 150 congestion cess has been on cards, the UB executive added.
Air Deccan had scrapped the cess following objections from the civil aviation ministry. Airlines had imposed the cess last year citing higher fuel burn in major airports owing to congestion in air and on the ground.

Despite civil aviation minister’s displeasure over the levy, most airlines held ground and continue to charge the cess.

Meanwhile, in a top-level appointment, Air Deccan has brought in Anand Ramachandran as vice-president (finance). Mr Ramachandran has over 10 years of industry experience by dint of his stints with Jet Airways and the Reliance Group. Air Deccan’s ex-COO Warwick Brady has joined Indonesia’s Mandala Airlines as managing director and CEO.

Sources in the UB Group said other belt-tightening measures likely to be undertaken by the low-cost carrier to fly out of rising losses include massive rationalization of routes and schedules. To Stan with, an airport service team from Kingfisher is currently working to bring out synergies in the operations of the two carriers, especially in the smaller airports.

Analysts note that Kingfisher is likely to rationalize some Air Deccan flights in the busy trunk routes, which also cause the maximum losses. Both Mr Mallya and Air Deccan chief Capt GR Gopinath earlier indicated there could be a slight increase in fares to enable the low-cost carrier to break even. Air Deccan reported losses worth Rs 213 crore in the first three months of the current calender year.

Talks are currently on with aircraft manufacturers Airbus and ATR for rationalization of the order books of the two airlines. Kingfisher and Air Deccan have together booked over 150-odd aircraft to be delivered over the next five years. Senior executives from the UB Group said Mr Mallya would be spending time with senior Air Deccan management to chalk out its growth and expansion plans towards the end of this month.

Both the carriers anticipate that they would be able to save up to Rs 300 crore annually through synergies arising out of joint operations.

Tiger Airways gets clearance to fly to 6 Indian cities

SINGAPORE: Singapore budget airline Tiger Airways said it has been granted rights to fly between the Southeast Asian city-state and six Indian cities. The carrier has obtained an air permit from the Indian government to fly to Chennai, Cochin, Goa, Trivandrum, Kolkata and Kozhikode, becoming the only Singapore-based budget airline to do so. Tiger Airways said in a statement.

Travel sites shift focus to forex & holidays

With the USP of best air fare losing ground in the online space, travel portals are increasing the range of non-air products like value holiday packages, discounted hotel deals, weekend breaks, foreign exchange and visa processing. Travel websites are aggressively promoting complete travel solutions rather than discounted air fare.

“Air tickets are being commoditized in the online space. We are becoming mere distributor where the brand of airline is a consideration and not the website. So it is more rewarding to offer better hotel rates and holiday packages,” says Deep Kalra, CEO of makemytrip.com. The website provides booking across 3,500 Indian hotels and 10-15,000 international hotels. It also offers foreign exchange and visa processing services.

Also unlike the low margins on air ticket, which is about 5% per ticket, the travel portals get 10-20% margin on the non-air products. “The online hotel booking space is still not as crowded as the air ticket. Out of the 100 flight bookings, hotel bookings account for 20% on our website. The revenue from online hotel booking is expected to rise significantly in the near future,” says Ashwin Damera, Founder CEO of Travelguru.

With the increasing gamut of non-air products, the online travel market, which is estimated to be about Rs 1,800 crore is slowly moving from the best price to best value model. Prashant Muttoo, GM of India times Travel says, “Creating the lowest price platform and providing freebies with air tickets is not a sustainable model in the long run. This will only subsidize the low margins on air tickets. So we would rather focus on adding more travel related products to create a wholesome travel

Thai’s Nok to start intl journey with Bangalore flight

NOK Air, a domestic carrier in Thailand, is going international with the launch of a daily Bangkok-Bangalore flight from May 31.

Banking on the new-found enthusiasm for shopping among the burgeoning Indian middle class, the low-cost airline is offering discounts at a few malls in Bangkok for those who travel by the airline.

The carrier has a 45-day offer of Rs 9999 for a round trip and gives passengers exclusive discounts of 50% on high-street brands such as Italian fashion house Replay and Australia’s Country Road at The Emporium, Siam Paragon and The Mall Department Stores in Bangkok. Further discounts are available on sports gear.

The inaugural offer is about 30% cheaper than the average travel cost on other airlines on this segment and the low-cost carrier wants to keep it 10% cheaper after the offer period,
Nok Air CEO Patee Sarasin, who spoke at the inaugural event in Bangkok on Tuesday night, said the ticket price has been cut to bring the cost down to the average tariff on the Indian domestic circuit so that shoppers from Bangalore can fly to Bangkok at almost the same price they hop to Indian destinations. This, he said, will make it attractive enough for shoppers to tour Thailand and also shop there.

The carrier is planning to extend the concept to Chennai, Hyderabad and Delhi and to other Asian cities such as Hanoi. While saying that the “shopping airline” was a novel concept, he said he was looking at expanding the passenger base by providing discounts at hospitals and spas in Thailand. When asked how he would entice Thais to take the Bangalore flight, he said Thais look upon India for its educational institutions and universities. He said the airline may bring Thai students to Bangalore to show them the educational institutions and the tech giants.

Go Air may offload 40% to Paramount

YET another tango in the sky has taken wing. Nusli Wadia and M. Thiagarajan, both primarily in the textile business but also fighting for a pie in the sky, appear to have embarked on a complex corporate manouvering in a fast-consolidating airline industry.

Nusli Wadia Group’s GoAir and Paramount Airways, part of the six-decade-old Thiagarajar Mills, are said to be in talks to meet the challenges post-mega mergers in the Indian aviation space.

GoAir may be open to divesting around 40% even as Paramount has placed a $ 100-$ 150 million cash buyout proposal. The premium service carrier could lace it with a stake offer to Wadias in the merged company, sources said. Significantly, the proposal comes at a time when Nusli Wadia is reportedly reviewing his group’s future in the bleeding aviation sector. The Wadias could be veering towards a strategic alliance given their history of exiting loss-making businesses.

Air hostesses will now act as shopping consultants

AIR hostesses are your companions at 35,000 feet taking care of meals and ensuring your comfort. Now they will also act as shopping consultants. Say, you are going to Bangkok and don’t know what to shop and where to shop, an air hostess could assist you. A start is being made by the air hostesses of Nok Air who will do the needful and all for just Rs 10,000 (return ticket cost, including taxes) on a Bangalore to Bangkok flight commencing from Friday (1 June). Positioning itself as ’shoppers airline’, passengers flying on Nok Air can also avail for a 10% discount on brands such as Esprit, Mango and Tiraberland at Bangkok’s famous Siam Paragon shopping mall. Other airlines could follow suit, offering value for money.

The low-cost airline experience is not just about ‘low cost’ (read low fares) anymore. “We studied the Indian market extensively, spending around Rs 80 lakh, before commencing our operations. We concluded that to survive, only offering low fares is not enough,” says Patee Sarasin, CEO, Nok Air, a Thailand-based low-cost carrier (LCC). It seems the airline has learnt its lesson from Jetstar Asia a LCC which grounded its operations from India last year when Singapore Airlines dropped its fares to match the low fares. Nok Air will be starting flights from Chennai in October, and from Hyderabad and Delhi next year. “Air Hostesses will guide passengers about the exchange rate and public transport as well, so that they don’t feel lost,” adds Sarasin. The airline besides economy class also offers business class seats charging return airfare of Rs 2 5,000. For marketing, the airline will be spending Rs 2 crore in India. It is expecting a load factor of 75-80% on its India route.

Meanwhile tour operators feel that passengers now have another low fare option to choose from. Cox &• Kings executive director Arup Sen says, “Air India Express, which predominandy flies to the Gulf has giveri a boost to tourism by offering affordable fares. The entry of Nok Air with its unbeatable prices on the India-Thailand route will propel tourism.” At present, LCCs like Al Jazeera, Air Arabia and Air India Express fly mainly to Gulf countries, not offering a wide range of options to tourists. Also, Malaysia’s low cost carrier, Air Asia, is expected to commence operations in India. “They are looking at some strategic marketing tie-up,” an industry source said. However, Thomas Cook managing director Madhavan Menon is not upbeat. “Nok Air, like other LCCs will just give another option to tourists. Some full service carriers, preferred by our customers, offer lower promotional fares.” he says.

MALLYA BOOKS 26% IN AIR OECCAN FOR 550 CR

THE king of good times, Vijay Mallya, appears to be interested in low-brow stuff as long as it makes business sense. He has struck a deal to pick up 26% in a preferential allotment by Air Deccan, which clearly gives him an opportunity to gain management control over the company that pioneered low-cost flying in the country.

The deal comes at a cost of Rs 550 crore (Rs 155 per share in the company) and will require him to make an open offer to pick up another20% stake.

Mr. Mallya’s UB Holdings, which made the bid for Air Deccan, and Capt GR Gopinath, whose vision and faith in the bottom of the pyramid led to the creation of Air Deccan, separately announced that the friendly bid has been accepted.

Both the airlines will remain as separate entities but benefit from the synergies of combined operations. Capt Gopinath will remain chairman of Air Deccan, which will now have a CEO as well while Mr. Mallya will be the vice-chairman. Effectively, Mr. Mallya will control a low-cost and premium airline. Kingfisher and Air Deccan will together have 71 aircraft covering 65 destinations and a market share of about 33%, way ahead of rivals.

The deal, which the two parties have been denying for long, represents a turning point in the consolidation process of the airline industry. A compelling reason for this marriage was that the merged entities of Air India and Indian and Jet and Sahara—both plan to offer premium and low-cost services—drove Kingfisher and Air Deccan into each other’s arm.

An- other equally strong reason appears to be financial crunch Air Deccan has been facing. It made a loss of over Rs 200 crore Capt Gopinath will last quarter and is believed to be losing at the rate of Rs 2 Crore a day since then.

Capt. Gopinath has been looking for cash infusion through equity funding for a while and was in talks with several in-the vice-chairman interested parties, five as he himself said, including the Anil Ambani Group. While he consistently maintained that he was looking for a strategic partner, it now appears he has been in talks with Mr. Mallya for quite a while. Sources in UB said although talks had been going back and forth for a while and Capt Gopinath was looking at all options to raise $ 100 million, the doors to acquire a large stake opened up in the last four days, after which the two sides burnt the midnight oil to work on the fine print.

The deal is structured in such a way that UB on Thursday made an upfront payment of Rs 150 crore while the balance will be paid once both the companies secure shareholder approval for the preferential allotment. Sources in UB said starting Friday, UB will have a representative to oversee Air Deccan’s operations and work quickly to bring in efficiencies of operations at all levels.

Mr. Mallya’s control over Kingfisher and Air Deccan will put some pressure on other standalone low-cost carriers like Spice-Jet, Indigo and Go Air. With this consolidation, the big three players—Al-Indian, Jet-Sahara and Kingfisher-Air Deccan— will be able to bring in some price stability in the industry.