Airlines India, Indian Airlines

Deccan Aviation has posted revenues of Rs.1352 and a net loss of Rs.340 crores for the year ended June 06. The financial year period is from April 05-June 06.The overall financial performance in the period was impacted by various factors including the increase in fuel and other input costs and introduction of 20 new aircrafts and the addition of 56 new routes besides rising personnel costs.

With a fleet of 34 aircrafts and 55 destinations as of 30th June 2006 the airline carried over 4.4 million passengers, over the 15 month period and emerged as the second largest airline with a market share of 21.2 % in June 2006.

Capt G R Gopinath, MD, Deccan Aviation, said “This strong market share is of strategic advantage, as it will be the springboard for our future expansion, growth & profitability, besides insulating us from the turbulence in the domestic aviation industry.” In addition to this a strong focus on improving the product which started early this year under the leadership of Warwick Brady -Chief Operating Officer who joined from Ryanair has started showing results.

The improved product consistent over the last few months has resulted in a nation wide perception change campaign titled ‘Have you flown Air Deccan recently? Its WOW!

Said Mr Mohan Kumar, Director Finance, ‘We have had a robust growth in our seat factor averaging 85% in the peak seasons. However the benefits of higher yields on the newer routes which account for over 58% of all routes as of now would flow in the next few quarters’

Typically new routes take a year to mature and start giving optimum yields. Air Deccan introduced 56 new routes during the period and carried 4.4 million passengers. Of the total 96 routes operated as of June 06, 56 were new routes which will take anywhere between 10-12 months to mature and yield the desired results.

Added Capt Gopinath ‘We are also working on innovative financial structures which will strengthen our finances and support our growth strategy’. Especially over the next 8-12 months which will see fierce competition with the entry of new players.

In fact a term sheet has already been signed for additional US $ 100 million. The board at the board meting today approved the same and documentation for the same is under process.

For the fifteen month period ending June 2006, the company posted a net loss of Rs. 340 crores on total revenues of Rs. 1352 crore.

Going Forward the company is focusing on 5 key issues to tide over the immense competition that the Aviation Industry in India is going to witness over the next 8-12 months.

1. Product :Keep working relentlessly to world class standard

a. Clean, safe aircraft

b. On Time performance to be better than Indian standards

c. Cancellations to be well within permissible norms

d. Short shipped bags to be the lowest in the country

e. Ensure that mature routes form 70-75% of the sectors in operations ( as against the current norm of approx. 42% mature flights (just 40 out of the current 96 sectors were mature sectors)

2. Infrastructure

a. Hangar: a world class hangar will be ready in the 1st Quarter of 2007( over 3 years after the airline took to the skies)

b. Flight training facility: work is on to ensure that the same is implemented by the 2nd quarter of next year.

3. Revenue Management: A senior team from Aer Lingus (who turned around despite the onslaught of Ryanair) has come on board and revenue management software is being implemented and will be operationalised by December 2006. In addition to this focus would be on ensuring that the composition of routes be worked on to ensure 70-75 % mature routes and the balance relatively new sectors.

4. Perception change: An ongoing campaign amongst customers, corporate and the channel partners will ensure that there be a significant change in perception and therefore get more ‘ high yield customers’ to fly us .In addition to this a corporate product will roll out next month.

5. Funding: A term sheet has been signed to raise US $ 100 million and the documentation is in process.