United Breweries will seek shareholders? approval to raise more debt to fund Deccan Aviation resulting in Vijay Mallya increasing his investment to 1,500 crore from the present Rs 1,000 crore.
United Breweries (Holdings) is also asking shareholders to approve raising the level of corporate guarantee for its other carrier, full-service Kingfisher, to Rs 7,500 crore from Rs 6,000 crore Passengers can expect fares on the India-UK route to see a steep fall with the government permitting Air Deccan to start flights on this route. It is expected that with daily operations using an Airbus A 330 aircraft, there will be an additional 2,100 seats (about 300 a day) one way across various classes on offer every week.
The average normal fare between India and UK is about Rs 30,000, analysts said that with additional seats and services, this can fall significantly. For example, before the start of private Indian carriers? operations to UK, the average fare was to the tune of Rs 45,000.
Carriers flew over 25 lakh in and out of India, last month, a growth of over 10% over the previous year.
The approval will help Mallya tap new markets for his aviation business. Mallya?s Kingfisher Airlines Ltd. bought Deccan last year with the discount carrier becoming eligible to start overseas flights this year on the completion of five years of domestic operations.
Indian rules stipulate that an airline must complete five years of domestic services to become eligible to start overseas flights. Kingfisher, which started in May 2005, would otherwise have been eligible to start overseas flights only in 2010.
?There will be a legal entity with the license and it will be free to operate the flights under whatever brand,? Ravi Nedungadi, CFO, United Breweries – the holding company of Kingfisher Airlines said. At present, Naresh Goyal promoted Jet Airways dominates the India-UK route. Jet operates a Boeing 737 aircraft on this route.
Aviation analysts are of the view that the pricing of Air Deccan needs to be watched keenly. ?Pricing will be an important factor. The carrier, needs to ensure that its pricing would attract more passengers, with out hurting its financials,? said an analyst.
Many view that with additional Indian carriers operating on the route, more and more passengers are likely to fly the Indian carriers. ?With Kingfisher joining the pack, the Indian carriers are expected to gain lead though eventually each of them will eat into the other?s market share,? Kapil Kaul of CAPA said adding that it would take around 12 to 18 months for the route to become viable for Kingfisher. ?The key to their long haul routes is the ability to sell their business class seats,? Kaul said.