Tough times for South Asian budget airlines

BANGALORE, India, June 1, 2007 (AFP) – Indian liquor tycoon Vijay Mallya bought a 26 percent stake Thursday in Air Deccan, throwing a 5.5 billion rupee (135 million dollar) lifeline to the loss-making discount carrier. Jet Airways bought rival Air Sahara for 340 million dollars in April.

Bangalore-based Deccan will issue new preferential shares to Mallya’s UB Group under the terms of an agreement outlined by the airline’s chief G.R. Gopinath, who will be executive chairman.

No shareholders’ equity will be diluted and no merger will take place between UB Group’s Kingfisher Airlines and Deccan Air as a result of the sale, which triggered an open offer from UB Group.

The announcement ends speculation about the future of the four-year-old airline, India’s first and largest no-frills carrier. Gopinath had been trying to raise capital to keep it in the skies and fund expansion plans.

It also draws the curtain on a public war of words between Mallya, 51, and Gopinath, 55, who had initially rejected an offer from the liquor tycoon to buy a stake in Air Deccan.

“UB was preferred over other interested investors, due to the inherent synergies existing in Air Deccan and UB’s Kingfisher Airlines,” Gopinath s