How Deccan, Kingfisher plan to draw synergies

With the deal finalised, Air Deccan and the UB-Group owned Kingfisher Airlines are likely to focus their attention on attaining synergies between the two airlines and generate benefits of Rs 300 crore this year.
The airlines, which fly the same type of aircraft (Airbus A-320s and ATR turbo-props), will immediately start drawing synergies in spares, and in engineering and maintenance that can account for 15-20 per cent of cost for an airline.
Kingfisher, which was in the process of setting up an engineering base after it cancelled engineering and maintenance deal with Indian, is likely to benefit from this synergy. It may choose not to set up a base in airports where Deccan already has one, but build bases in other airports.
Similarly, the two airlines will start drawing synergies in spares — airlines keep a spare pool on lease from manufacturers on which they pay a lease rental of 1 per cent or 0.75 per cent of the value of spares.
At least for now, there are no plans to integrate people, and hence, there won’t be any job losses.
The airlines also plan to draw synergies in distribution. Kingfisher, for instance, uses global distribution systems (GDSs) like Galileo and Abaccus. Deccan can leverage these relationships by ‘marking us on their GDS at a marginal cost per passenger’, said the Deccan official.
03/06/07 Ranju Sarkar/Hindustan Times

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Categories: Air Deccan Jun 2007, Kingfisher Jun 2007