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Finally, after loads of denials, Captain Gopinath (earlier MD of Air Deccan and now the Chairman) announced on May 31st, 2007, that a 26% stake of his airline has been sold to Vijay Mallya-owned UB Group. It was indeed a marriage of unequals.
The flamboyant Mallya runs India's newest full-cost carrier (in fact when a flurry of low cost carriers were entering the market, he decided to go the other way), and is known for providing the best facilities to his passengers, while Air Deccan is known for its cost-cutting measures.

The two airlines' business models seem to be diametrically opposite and probably this is why these will not be merged, and continue to be run as separate entities, with Vijay Mallya's men going on the board of Air Deccan. In fact if the market share of the two entities is added, it exceeds that of the Jet-Sahara combine.

It may not sound like good sense that Vijay Mallya bought a heavy loss-making airline, but this could just be the pill that the doctor ordered to turn the fortunes of Air Deccan, and in fact of all the other low-cost carriers. This deal is all set to bring an end to the fierce price wars among various low-cost airlines (probably this is why on the day of this deal, a jump was seen in the share prices of Spice Jet and Jet Airways).

More To Come

It surely is consolidation time for the Indian aviation industry with three deals coming in quick succession - Jet-Sahara, Kingfisher-Deccan, and the much awaited Air India-Indian Airlines merger which has already been cleared by the Union cabinet. And as I write this, media reports suggest that there could be a couple more deals in the offing.

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* Contributed by: -
Shekhar Arya,
MBA 1st Year,
Department of Management Studies,
Indian Institute of Technology, Roorkee.