Mounting losses squeeze Air Deccan

New Delhi: Battered from three years of almost non-stop losses, Deccan Aviation Ltd, owners of India’s biggest low-cost airline, Air Deccan, appears close to running out of all its equity, according to separate analyses of its finances by investment bank JP Morgan Chase and Co. as well as Mint .
On 31 March, the day the company closed its books for the last quarter, Deccan Aviation, which runs Air Deccan and a small helicopter charter operation, had not more than Rs42 crore in equity, and, perhaps, even less than that in available cash for its day to day operations, according to Mint’s analysis.
If the airline is losing money at the same rate today as it did in the January-March quarter—about Rs2.36 crore a day—that equity has likely been already depleted.
“Excluding the IOU that Deccan has from Investec, we estimate that Deccan has close to zero residual equity,” JP Morgan Chase analyst Peter Negline wrote in a note to investors on Friday, referring to instalments from a UK bank still due to the company from a deal completed last year. “If they cannot find private equity to inject funds immediately, we believe that their departure from the market is imminent.”
It is not possible to ascertain Deccan Aviation’s cash reserves since the company hasn’t disclosed the figures since the quarter ended September 2006. Deccan is also likely to have in hand money from advance ticket sales, estimated at between Rs20 crore and Rs30 crore, though the company does not release those figures either.
04/05/07 Mehul Srivastava/Livemint

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Categories: Air Deccan May 2007