Deccan Aviation, the owner of the largest low cost airline in India – ‘Air Deccan’ is experiencing turbulent times. ICICI Venture has just opted for partial exit and there is a higher possibility that the complete exit is on the cards.
This is primarily because of few reasons and we think that we must share these reasons with you. The aviation turbine fuel (ATF) is a prominent cost item for most of the airlines, and for low cost airlines it is the cost item to look at. With the crude oil prices touching US $ 80 mark the ATF prices are going through the roof and the airlines are bleeding. There are talks that the crude oil prices are expected to touch a triple digit mark. In other words, the things are meant to worsen from this point.
The management control of Air Deccan will be with Mallya controlled Kingfisher post this open offer. Mallya is known for keeping the shareholders at bay. Otherwise, the most profitable liquor business is not really profit making when it comes to Mallya companies. The real profits hardly make their way to profit and loss accounts of the companies. ICICI Venture here must be considering all these factors.
Other words, we intend to say exit the airline operators. We were never bullish on this segment as an investor. One has rightly observed, The best way to become a millionaire to own an airline, if you are a born billionaire.
Anyways, this is just the start of the business. What we intend to say is, the market is all set to go down. Please check the newspapers on the next day of any fall, these guys will shamelessly say that the crude prices are going up and that is the prime reason behind the market fall. For some time now, we are out of the market and we prefer to wait with our cash bags for the correction to come in.
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