7:3 swap for Kingfisher-Deccan merger

Merged entity to be named Kingfisher Airlines.

The Kingfisher Airlines-Deccan Aviation merger swap ratio has been fixed at 7:3. This means shareholders in the UB group-promoted Kingfisher Airlines will receive three shares of Deccan for every seven shares that they hold.

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 merger of Kingfisher Airlines with Deccan Aviation moved a step closer to its conclusion today with the Deccan Aviation board approving the merger and the share swap ratio after a board meeting in Bangalore.

According to the management of Deccan, the share entitlement ratio was determined on the basis of independent valuations by KPMG and Dalal and Shah.

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. Jet Airways together with JetLite have a marginally higher market share of 29.9 per cent.

Deccan losses
For the quarter ended December 31, 2007, Deccan posted a net loss of Rs 190.86 crore on revenues of Rs 567.63 crore.

Kingfisher had posted a loss of Rs 575.8 crore in FY07, on a turnover of Rs 1,553 crore and it is believed that the airline has accumulated losses of about Rs 1,200 crore, which amounts to a negative net worth of Rs 385 crore.

This financial year, Kingfisher is expected to record a turnover of Rs 3,000 crore, while revenues for Deccan should be in the region of Rs 2,200 crore.

Deccan shares lost 1.81 per cent on the Bombay Stock Exchange on Thursday to close at Rs 173.90.

Looking beyond
The Deccan board also approved a proposal for the sale of the charter business of the company to an entity that will be jointly owned by Captain G R Gopinath and the UB Group.

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. There is also a huge opportunity on the India-US route which Kingfisher has been eyeing.