Kingfisher-Deccan may be dragged to SC by govt

Mumbai: The Union ministry of corporate affairs is all set to challenge the Karnataka high court’s decision to clear the merger between Kingfisher Airlines Ltd and Deccan Aviation Ltd in the Supreme Court.
The legal threat, if followed through by the ministry, will add a new headache for Kingfisher as it, along with other Indian airlines, tries to cope with mounting losses that are giving the entire industry pause even as they had mapped out major expansion plans.
Owners of India’s two major private airline groups—Kingfisher/Deccan and Jet/Sahara—have strong political connections and powerful backers that many industry observers say have often helped them in getting approvals as well as, occasionally, getting rivals’ approvals slowed or blocked. The other major airline group, Air India, is government-owned.
The UB Group-promoted Kingfisher Airlines, a Mumbai-based full-service airline, acquired a majority stake last year in Deccan Aviation, which runs the country’s largest low-fare carrier Simplifly Deccan (erstwhile Air Deccan).
An official with the ministry of corporate affairs noted the ministry had issued a show cause notice to UB Group for not complying with section 108(A) of the Indian Companies Act, which requires government approval if a takeover results in the merged entity gaining more than 25% of the market share. Business Line reported the show-cause notice on 20 June.
Kingfisher and Deccan Aviation together command a market share of 27.8%. Immediately after the merger in May 2007, the combined market share of the two firms was 30.1%. The official didn’t want to be identified given the sensitivity of the issue.The ministry of corporate affairs is waiting for a copy of the court judgement.
14/07/08 P.R. Sanjai/Livemint

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Categories: Deccan Jul 2008, Kingfisher Jul 2008