Interim results show that the synergies between his carrier and Deccan have resulted in cost performance improvements that have defied popular predictions. Dr Mallya stated, however, that the biggest winner from the deal will prove to be the national airline industry.
Before the arrival of Deccan on the scene, he explained, the prevailing fare from Bangalore to Delhi, a route operated by three carriers, was INR12,000. With Deccan's emergence and the impact it had on prices, the average ticket cost only INR2,500. This, he explained, may have stimulated the market and generated a lot of excitement, but it also created "a lot of balance sheets splashed all over with red ink."
With the combining of forces, which the charismatic CEO says will allow him to offer "both the lowest fares in the market, as well as the highest", there are now three major groupings – Air Deccan/Kingfisher, Air India/Indian and Jet Airways/Sahara. Because these three groups control 83% of the domestic market, there will be a return to sustainable pricing and operations.
"I think everyone has had about enough," he says. "We are not looking to operate as cartels or exploit consumers, but we do want to make some money and insert some sanity into the industry. In a few years, I think we will see preserved business [low cost and full-service] models, but a vastly improved bottom line."
Vicky Karantzavelou - Monday, November 05, 2007