Speculation in the air as Deccan Aviation scrambles for new cash

New Delhi: In Bangalore, where the top brass of Air Deccan, India’s biggest low-cost airline, are facing lawyers and financiers from India and overseas, one of two scenarios is likely playing out.
Scenario A: Private-equity (PE) players, being hit up by the airline for a cash infusion of $100 million (Rs410 crore), are driving a hard bargain as they point to years of non-stop losses that have eroded the airline’s equity to almost zero. They—and everyone else—are acutely aware that a financial lifeline, a Rs200 crore line of credit from the State Bank of India (SBI), is not just completely drawn down, but set to expire within two weeks.
Scenario B: The same PE players are being told that one particularly harsh quarter, where the airline lost over Rs213 crore, doesn’t change the fact that the carrier, which has tightened its belt, is generating at least Rs 6 crore a day in revenue. With a solid 22% share of all airline passengers in India, would a potential investor want to really pass up on the second-biggest airline in the fastest-growing aviation market in the world?
Next week, in all likelihood, Air Deccan, owned by the Bangalore-based Deccan Aviation Ltd, will announce the results of these hard-nosed negotiations. Until then, analysts who watch the airline industry but aren’t privy to the ongoing discussions say Scenario A is more likely to pan out, though at least two people familiar with the matter, including one close to the company, insist Air Deccan is firmly in the cockpit on this ride.
19/05/07 Mehul Srivastava/Livemint

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Categories: Air Deccan May 2007