Deccan-Kingfisher combine to look at share sale

MUMBAI (Reuters) - Deccan Aviation Ltd will merge the scheduled airline operations of unlisted Kingfisher Airlines, to create one of the biggest air carriers in the country and pave the way for the latter to fly overseas.

The combined operations will need about $250-300 million over the next two quarters and it may look at private placement of shares, UB group Chief Financial Officer Ravi Nedungadi said.

India's top spirits maker UB group, which runs Kingfisher Airlines, bought a 26 percent stake in Deccan in May through United Breweries (Holdings) and subsequently raised it to 46 percent.

Deccan will be called Kingfisher Airlines after the merger and the charter operations of Deccan will be spun off into a separate firm to be equally owned by Deccan's founder G.R Gopinath and the UB group, Deccan said.

The combined entity will operate the two brands -- Deccan, a low-cost airline, and Kingfisher, a full service carrier, Nedungadi said.

"The two board's have taken a decision. The legal process will take anywhere between 4-6 months. From an organisational point of view the the integration is already on the fast track," he said.

The merger was recommended by consultancy firm Accenture and the merger methodology will be suggested by consultants KPMG and Dalal and Shah.

"The merger will be structured in such a way to allow us to carry forward the accumulated losses," Nedungadi said. The two airlines have a combined loss of about 20 billion rupees and this can be set off against future profits.

Nedungadi said the maintenance and engineering divisions will remain with the combined airline for now. UB group will also look at rationalising capital expenditure.