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Deccan Aviation narrows losses with plane sales, higher fares

Deccan Aviation narrows losses with plane sales, higher fares
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First Published: Tue, Apr 22 2008. 11 07 PM IST

Smart moves: Ramki Sundaram, officiating chief executive, Air Deccan. (Photo: Jadgeeshan NV/Mint)
Smart moves: Ramki Sundaram, officiating chief executive, Air Deccan. (Photo: Jadgeeshan NV/Mint)
Updated: Tue, Apr 22 2008. 11 07 PM IST
New Delhi: Bangalore-based DeccanAviation Ltd, which runs the largest low-cost airline in India, has reported losses of Rs199.6 crore in the January-March months, 6.6% less than the year ago losses, after average ticket realizations expanded more than 36% and sale-and-lease-back deals on two planes in its fleet buoyed results in the third quarter of the company’s fiscal year.
The stronger operations at Deccan, despite lower seat occupancy on its flights, helped it offset record fuel costs, Ramki Sundaram, its officiating chief executive, said. Deccan, into which Kingfisher Airlines Ltd, a full-service carrier controlled by UB Group, is being merged, reported total revenues of Rs607.66 crore in the latest quarter, up one-third from Rs457.45 crore in the March quarter of 2007. The revenues were helped by Rs25 crore from sale and leaseback arrangements.
Smart moves: Ramki Sundaram, officiating chief executive, Air Deccan. (Photo: Jadgeeshan NV/Mint)
The performance in the January-March period takes the losses of Deccan Aviation— before the Kingfisher Airlines merger—in the three quarters gone by to Rs643.64 crore. Deccan, which accounts for about 14.6% share of the domestic air passenger market, is the first of the three listed airline companies to announce results for the March quarter.
Although ticket yields have been rising, the results for the quarter cannot be taken to mean a turnaround can be guaranteed in the current quarter for Deccan, Sundaram said. “It will depend on fuel costs which are still rising,” he said.
Nearly $1 billion or Rs4,000 crore in total losses are expected in the country’s domestic airline industry this financial year on account of high fuel prices and additional capacity, up from an estimated $700 million in the last fiscal year, Naresh Goyal, chairman of Jet Airways India Ltd, the country’s largest airline group by passengers carried, predicted earlier this month.
“With these oil prices what else do you expect (but losses),” said R. Sreesankar, head of research at Mumbai-based IL&FS Investsmart Ltd. Aviation fuel prices have risen 30% to Rs53,309 a Kl in March from a year ago.
The January-March period was the first quarter when Deccan ran under a UB Group-run management after the group controlled by billionaire businessman Vijay Mallya consolidated a 46% stake in the low-cost aviation firm to a majority holding late last year.
In the quarter, instead of chasing volumes or load factors keeping with the traditional low cost carrier model, Deccan focused on garnering high yields or more revenue per passenger—a strategy more popular with full service carriers such as Kingfisher Airlines and Jet Airways.
The intial months this year reflected this change. Deccan, which flies 320 daily flights with 41 aircraft, reported a steep dip in its load factors. Flight occupancy shrunk by 15 percentage points to 71.8% in January this year from the same month of 2007.
The financial results do not reflect the benefits of higher ticket realizations yet, an analyst said. “The real benefits of the synergies (between Deccan and Kingfisher) will be visible in Apil-June quarter,” said Centre for Asia Pacific Aviation’s Kapil Kaul. “Deccan would look at 2008-09 to reverse the trends of its losses,” he predicted for the company’s fiscal year.
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First Published: Tue, Apr 22 2008. 11 07 PM IST