Air Deccan to cut loss-making routes

Mumbai: Air Deccan has said it will stop flying unprofitable routes, as it seeks to come into the black by 2008. The Bangalore-based budget airline aims to carry 80 lakh passengers in 2007, compared with 45 lakh this year, and aims to break even on as many routes as possible by cutting operation costs. It has not indicated which routes will be affected by the plan.

Air Deccan, Jet Airways, Spicejet, Kingfisher Airlines and other private airlines are facing losses as a result of increasing competition, which is squeezing their margins. Air Deccan made a loss of Rs 341 crore ($74 million) in the 15 months ending June 2006. Indian private carriers will probably make a combined loss of Rs 1,125 crore ($250 million) this year and next, as they cut fares to as low as 1 rupee to maximise capacity utilisation.

Redeploying excess capacity and containing costs by utilising aircraft for longer hours could help Air Deccan and other budget airlines emerge from losses. Air Deccan is India's second-biggest airline by market share behind Jet Airways.

The airline recently sold and leased back two Airbus SAS planes and three spare engines to balance its books. The company will consider similar deals for more planes. Air Deccan has 92 planes on order, valued at Rs 17,000 crore ($3.8 billion), to be delivered by 2012, most from Airbus. The airline has postponed a plan to start overseas routes in a joint venture in Sri Lanka, to focus on the turnaround.

The airline today announced a Rs 675 crore ($150 million) 10-year maintenance agreement with Lufthansa Technik to support its fleet of 14 Airbus planes. Lufthansa Technik and its Indian subsidiary One Stop Airline MRO Support will independently serve the fleet of 60 Airbus A320 airplanes with spares at the carrier's hub, Bangalore, Air Deccan and Lufthansa said in a joint press release. Lufthansa Technik will set up a regional pool of spares in India because of increasing demand in South Asian countries.