MERGER BETWEEN KINGFISHER

AND DECCAN AIRLINES

INTRODUCTION-KINGFISHER AIRLINES
Kingfisher Airlines is a private airline based in Bangalore,
India.
Kingfisher Airlines started its operations on May 9, 2005, with
a fleet of 4 brand new Airbus - A320, a flight from Mumbai to
Delhi to start with.
The airline operates on domestic as well as international
routes, covering a number of major cities, both in and outside
India.
In a short span of time, Kingfisher Airlines has carved a niche
for itself in the civil aviation industry.

Kingfisher engaged earlier in the
following business
Scheduled Air
Transport
Services
Scheduled Air
Transport
Services
Commercial
Airline
Business
Ground handling
services






Training academy
Merger Motive
Vijay Mallaya had a vision
His successful Kingfisher Airlines had
completed a merger agreement with low cost
carrier airlines Deccan Aviation on May, 2007.
With this deal he planned to become the
dominant low cost carrier in the country
INTRODUCTION-DECCAN AVIATION
Deccan Aviation, promoted by Capt. G.R. Gopinath, Capt. K.J.
Samuel and Capt. Vishnu Singh Rawal.

It was initially incorporated as a private limited company on
June 15, 1995 in Karnataka with the main object of pursuing
chartered aviation services both for commercial and non
commercial purposes in India and to provide all aviation
related services.

It was converted into a public limited company in 2005.

Deccan Aviation-Mission
To demystify air travel in India by providing
reliable low cost and safe travel to the
common man by constantly driving down the
air fares as an ongoing mission
Deccan was engaged in earlier in the
business
Scheduled Air Transport
Services
Scheduled Air Transport
Services
Commercial Airline
Business
Non -Scheduled Air
Transport Services
Scheduled Air Transport
Services
Charter Services
Operations
Market share data
Airline Percentage
Indian Airlines 28%
Jet Airways 35%
Air Sahara 12%
Air Deccan 11%
King Fisher 6%
Spice Jet 5%
Others 3%
Total 100%
Kingfisher & Air Deccan Merger-
Key Features
On 1
st
June 2007, the Board of Air Deccan approved the
allotment of equity share of 26% to UB group & its nominees.
The shares were allotted at Rs.155 per share approximately a
10% premium for the current market price (CMP). The UB
group made the money in two phases: Rs.150 Crore as initial
investment & Rs396 Crore at the on or before the end of June.
Once the investment process is complete, the UB group will
become the single largest share holder in the Deccan Aviation
ltd.
UB group will make an open offer to acquire minimum 20% to
all shareholders of Deccan aviation at a price of Rs.155.


The Kingfisher-Air Deccan group will be the largest domestic
airline with a fleet of 71 aircraft including 41 Airbus aircraft and
30 ATR aircraft.
For the near future, Kingfisher will continue to serve the
corporate and business travel segment while Air Deccan will
focus on serving the low fare segment but with improved
financial prospects for both carriers.
Kingfisher Airlines and Air Deccan will, henceforth, work very
closely together to exploit the significant synergies that exist in
the areas of operations and maintenance, ground handling,
vastly increased connectivity, feeder services, distribution
penetration etc.


Kingfisher & Air Deccan-Merger Advantage
The fresh equity capital will allow the Deccan to pay the loans
& to fund various infrastructure projects.
Reduction of cost by sharing infrastructure
The merger ensures that Kingfisher does not need to invest
more in infrastructure or in spare planes.
The combined share of the two carriers will increase the
Market share.
As per the existing laws Kingfisher Airlines would not be able
to operate on international routes until 2010. However Air
Deccan would be eligible from the second half of next year as
its five-year ceiling is coming to an end.


Kingfisher & Air Deccan- Synergies

Operational Synergies
o Kingfisher and Air Deccan have exactly the same fleet of
aircraft, the same equipment in terms of engine, in terms of
brakes and in terms of avionics.
o The airlines will achieve perfect synergies in the backend
while preserving the front-end and that will enable both
Deccan and Kingfisher to be profitable.
o Apart from ground handling synergies, there is a whole host
of items where duplication is completely unnecessary and can
now be avoided.

Infrastructure Synergy
o Kingfisher and Air Deccan will now be able to access ground
infrastructure at 65 airports, of which more than 28 are common
to both the set ups.
o The new entity will have over 71 aircraft.

Route Synergy
o On the most lucrative of routes, New Delhi-Mumbai, that on its
own accounts for more than half of India's 33 million passenger
traffic, the two carriers will now account for a total of 155 flights.

o According to Dr.Mallya kingfisher is considering swapping or
switching in coordination with each other to rationalize the fleet
structure.

Investment synergy

o Both airlines have orders for about 90 aircraft currently placed
with European aircraft major, Airbus Industries.

o Kingfisher has placed orders for new aircrafts at higher prices as
compared to Air Deccan.
7:3 Swap ratio for kingfisher & Deccan
merger
The Kingfisher Airlines-Deccan Aviation merger swap ratio has
been fixed at 7:3.
Deccan Aviation's name will be changed to Kingfisher Airlines
and the merger will be effective from April 1, 2008, subject to
statutory approvals.
The Deccan-Kingfisher combine commands a market share of
just over 29.3 per cent (source: DGCA) and accounts for 50
per cent of deployed capacity in the south.
Deccan Losses
For the quarter ended December 31, 2007, Deccan posted a
net loss of Rs 190.86 crore (Rs 1.91 billion) on revenues of Rs
567.63 crore (Rs 5.68 billion).
Kingfisher had posted a loss of Rs 575.8 crore (Rs 5.76 billion)
in FY07, on a turnover of Rs 1,553 crore (Rs 15.53 billion) and
it is believed that the airline has accumulated losses of about
Rs 1,200 crore (Rs 12 billion), which amounts to a negative net
worth of Rs 385 crore (Rs 3.85 billion).
Deccan shares lost 1.81 per cent on the Bombay Stock
Exchange to close at Rs 173.90.
Looking Beyond.
The merger of Kingfisher with Deccan Aviation will allow
Kingfisher to fly overseas from May when Deccan completes
five years of existence.

This is important as markets like the Gulf region can be
lucrative, particularly when there's excess capacity in the
home market.
Are these Airlines Mergers
Working????

The answer is NO


Mars vs venus.
Raise in fares.
Both loss making entities.
o First Reason is Subjectivity: The business investor cant resist
such a glamorous business.

o The second Reason is objectivity: Pricing pressure exerted by
other low cast carriers (LCC)