Air Deccan: A wholly owned subsidiary of Deccan Aviation, Air Deccan, is Indias first low cost carrier.

It has a vision to enable every Indian to fly and has adopted the mascot of the common man of cartoonist Laxman. The common man represents the airlines simple and no frills approach. Air Deccan is the nano of Aviation industry; what nano plans to do to the automobile industry (converting two wheelers into four wheelers) Air Deccan has done to Aviation industry (shifting people from rail travel to travel by air). The prices of air ticket have down drastically as low price offerings were initiated by Air Deccan. Now focus is towards customers. Today there is a new segment of travelers; the leisure customers. Yet another segment is introduced and that is the first time travelers. Merger:Air Deccan airlines merged with Kingfisher Airlines and decided to operate as a single entity from April, 2008. It would be known by a different name-Kingfisher Aviation. The merger is based on recommendations of Accenture, the global consulting firm. KPMG was asked to do the valuation and the swap ratio was decided accordingly. The merger came through on as Vijay Mallya from Kingfisher airlines bought 26% of the stake in Air Deccan. The unification of the two carriers had to be sanctioned not only by the two panels, but also by the institutional investors, independent directors, and other shareholders. Air Deccan had four independent directors-which included prominent persons like IIM Prof Thiru Naraya, Tennis player Vijay Amritraj, and A K Ganguly, Former MD Nabisco Malaysia. After the merger, the company has a combined fleet of 71 aircrafts, connects 70 destinations and operates 550 flights in a day. The combined entity has a market share of 33%. Gopinath would continue as the Executive Chairman and Malay would take charge as Vice Chairman. The charter service of the respective airlines would be hived off and operate as a separate entity. Post merger, KingFisher would operate as a single largest (private) airline in the

sub-continent. Besides, operational synergies (engineering, inventory management and ground handling services, maintenance and overhaul), the management and staff of both the airlines would be integrated. They would be stronger vis-a vis lessors, aircraft manufacturers (Airbus in this case), and will also spend less on training and employees. Costs would also reduce which is associated with maintenance of aircraft. The savings in cost would be lower by about 4-5% (Rs 300 crores) (Business Standard, June 3, 2007, p4) which is a large sum. It would result in a saving of 3 billion in the first year itself through the sharing of aircraft and workers. (Business Standard, June 13, 2007, p-13.) Further, by devising a more optimal routing strategy it could help in rationalizing the fares. Before the merger Air Deccan recorded a net loss of Rs 213.17 crores on revenue of Rs 437.82 crores for 2006-07. The company had also raised Rs 400 crores through an IPO in May 2006. The merger will create a more competitive business in scale and scope to emerge as market leader. Air Deccan began its operations with one aircraft and with one flight but after the alignment with Kingfisher Airlines, has a total fleet of seventy one aircrafts-41 Airbus and 30 ATR aircraft (Business Standard, June 7, 2007, p-8). It operates 537 flights (Business Standard, June 3, 2007, p-4) and covers 70 destinations. It offers point to point service. I After the merger, it is expected that Kingfisher will focus more on the international routes while Air Deccan will give it a wider domestic reach. Also Air Deccan plans to continue as a low cost carrier while Kingfisher will function as a full-service carrier. There will be immense synergies as both operate Airbus. The average age of the Air Deccan fleet is 6.1 years as of Apr 2006.* Air Deccan operates a fleet of 43 aircraft comprising 20 brand new Airbus A320 aircraft and 23 ATR aircraft. The Airbus aircraft serve metro routes while ATR are utilized for Tier II and III cites and also for small airports. The newly

formed company plans to revisit their fleet plan in coordination with each other to rationalize the fleet structure. Working on these lines the company has already placed orders from the European aircraft major, Airbus Industries for about 90 aircrafts. These include five of the largest aircraft-A380, the first of which is slated to be delivered to Kingfisher by 2011. It is also Indias largest private sector helicopter charter company, which pioneered helitourism in India. It offers point to point service. It has a secondary hub at Chennai.*Deccan Aviation is the largest private sector helicopter charter company in India. It has a fleet of 12 helicopters and small aircraft deployed in 8 bases across India. These bases are at Bangalore, Mumbai, Delhi, Ranchi, Hyderabad, Surat, Katra and Colombo (Sri Lanka). There are many changes that have taken place. This period of consolidation in the sky gives a good signal to the airlines industry. It may lead to reducing the over-capacity existing in the market and thereby stabilizing prices, increasing yields and bringing down costs. The era of cheap fares might also come to an end. Limited Air Infrastructure: In the developed countries, growth in infrastructure kept pace with growth in airline industry. These countries had built various secondary airports. For instance, the city of London itself has more than one airport. These countries also have a seamless ATC (air traffic control) system because of which it is able to handle the growing passenger number. In India no metropolitan city yet has a second airport. These secondary airports have a lower access, landing charges allowing for the cost rationalization. The LCCs in US and Europe have been successful also because of these reasons. In India, demand has been created in the aviation sector and now it is trying to create the needed infrastructure (supply side) to meet the increased demand. The modernisation of airports may ease the situation to a large extent. So would the creation of secondary airports. Cost Structure of an Airline: The airline industry is most sensitive about the cost of aviation turbine fuel (ATF). This

contributes to 40-45% of an airlines operating costs. According to the Federation of Indian Airlines (FIA), the average domestic price of ATF is 60-70% higher than that at regional aviation hubs in Singapore and Dubai. Even the discounted price of ATF for international operations is 40% higher than prices elsewhere. ATF prices consider not only central duties but also state sales tax. Air travel is expected to become more costly as per the directions given by the civil aviation ministry (which plans to impose cess on air travel to fund development of economically unviable airports and air routes). Air Deccans Ticketing System: Air Deccan has been innovating with new schemes. It was the first to introduce the concept of booking tickets online. This is done to avoid travel agency costs. Infact Air Deccan that pioneered the concept of e-ticketing in India and its schedules, fares, and availability of tickets online are published on their website www. airdeccan.net. It also operates an All India 24*7 multi-lingual call centre for booking of tickets. Facility for booking its tickets are also provided at its call centre, travel agents, airport counter, Reliance Webstores in 104 cities, HPCL outlets in select states. Air Deccans passengers can print out their tickets and exchange them for a boarding pass when they check in. Infact the use of the internet for booking tickets is something the airline companies encourage considering this allows them to evade the middle-men and travel agents et alagency commission is a big drain airlines as 10-15 % of the ticket cost is given back to the agents as commission. Innovation in Pricing: Air Deccan introduced the concept of dynamic pricing which means selling at a higher price during high season (tourist season) and selling cheap during the off-seasons. Therefore, everyday the price would change depending upon the kind of competition and also the load factor. Also it introduced various schemes under which tickets were offered at Re 1 also. Innovative Promotion at Air Deccan:

Air Deccan has also been very innovative in its promotion efforts. It puts its advertisement on OOH (out-of-home) signposts and print advertisements too. It offered 3 lakh seats at the rate of Rs 3 per seat for a certain period. Air Deccan had also initiated special offers targeted at families. Value Flier package, Value Flier Plus, and Super Flier and Super Flier Plus. These are focused on single individual or a family of four. It also promoted a fly for free programme. Financing Air Deccan: To meet its financial needs, Deccan Aviation Ltd had secured $100 million funding from European funds Investec Ltd and HSN Nordbank AG by pledging the right to buy 60 planes it has ordered with Airbus Industries. Deccan Aviation has given the right to purchase 60 Airbus A-320 planes worth over $2 billion at the list price, to South West Aircraft Trading Limited-a company set up in Cayman Islands by Investec Ltd and HSH Nordbank AG. Deccan Aviation will lease or purchase the aircraft from this leasing company. It will acquire the aircraft from the leasing company at the prevailing market price, allowing the leasing company to book a profit. Deccan Aviation had placed the order with Airbus at a price lower than the present market price. MRO Facilities: Maintenance, repair and overhaul facilities are lacking in India. Airlines have been dependent on its foreign counterparts for such services and as such fly their planes abroad for such services. Air Deccan is setting up its own MRO facility in India. India is also a great hub of outsourcing and given our cost competitiveness, skilled manpower and abundant scope for growth there is reason to make India a BPO hub for the global aviation industry
LOW-cost carrier Air Deccan on Monday joined hands with Delhi-based AVA Merchandising to launch an in-flight shopping scheme. The scheme, `Brand for Less,' offers shopping at over 10,000 feet during the flight at a reduced cost. "This is a value addition to those flying with Air Deccan. The facility would be available in all 146 daily flights of the company," the Air Deccan Managing Director,

Captain G.R. Gopinath, said. The scheme would be implemented with immediate effect and the company targets sales of approximately 25,000 branded products per month. The figure is likely to increase, as the airline increases its fleet strength in the near future. The products would be available at a huge discount over the market retail price, he added. The carrier's operational costs have gone up 20 per cent on account of the increase in crude oil prices. The airline had recently increased some of its fares by 12-15 per cent, attributing the hike to the rising prices of aviation turbine fuel (ATF). "The volatile oil prices have affected everybody and we have suffered too...the prices are really going up right now. But we hope it will reach a peak and will reduce," Captain Gopinath told newspersons here. Stating that the Government's decision to allow airlines to hedge ATF from the international market was a good move, Mr Gopinath said the carrier had already requested the Government to allow private carriers to hedge fuel from abroad. "We have got a clearance from the Civil Aviation Ministry and the issue has been taken up with the Finance Ministry...it should also be approved by the Reserve Bank of India. We hope a positive decision will come soon," he said. He, however, added that the company would wait for a more opportune time to hedge, as the prices were too high. "We normally hedge when the prices are low. And we are hoping for a good time to do that," Mr Gopinath said. Referring to the fleet augmentation, Mr Gopinath said the airline would add 10 aircraft this fiscal. "This fiscal, we have already signed for five more A-320s and the same number of ATRs. Right now, we have seven Airbus." The airline said it would fly four million passengers this fiscal

INSURANCE OF FLIERS

AIR DECCAN NEWS

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Deccan has introduced a new Rescheduling/ Cancellation Policy- effective from 17th March 2008, for all tickets purchased post 0030 hrs on17th March 2008. Click here to view the policy. Deccan has introduced the Domestic Travel Insurance for Deccan passengers. The Domestic Travel Insurance scheme is an insurance programme offered by the ICICI Lombard General Insurance and has been especially designed for the guests of Deccan Aviation Ltd. This programme is designed keeping the domestic travelers needs in mind and is available via the Deccan Aviation Ltd. online booking system. Please note that the programme was launched on 28th March 2008 and is not available for flight bookings prior to that date. Note: The insurance cover is valid from the date of commencement of the trip till the date of return to the origin or usual city of residence or 30 days from the date of commencement of trip, whichever is earlier. The insurance covers the following contingencies: Section Cover I II III IV Hospitalisation Expenses For Injury Trip Cancellation & Trip interruption Loss of Checked In Baggage Delay of Checked In Baggage Description Reimbursement of medical expenses due to hospitalisation Due to personal contingencies or natural earthquake, storm, flood etc. In case of total loss of checked in baggage In case of delay of checked in baggage for more than 6 hours calamities Sum Insured Up to Rs.75,000 Up to Rs.10,000 Up to Rs.10,000 Rs. 3000

For more information on Travel Insurance Cover, click here.

The Tele Check-In facility is the newest service introduced for all Deccan guests. This facility allows the guest to call the 24/ 7 All India Call Centre at 39008888 (prefix city code) and check in, thereby reducing time spent in long queues at check-in counters at the airport. Guests can call between 24 hours and 2 hours prior to their flight departure and Tele Check-in. for more info on Tele Check In, click here.