Air Deccan signs deal to raise $100 mn

Air Deccan, the country's second largest airline, on Friday announced it has signed a deal with two European banks to raise $100 million (Rs 450 crore) to help ensure its financial stability and insulate it from the "turbulence" in the domestic aviation industry.

India's leading low cost airline, which had reported a loss of Rs 340 crore (Rs 3.4 billion)  for the 15-month period ended June 30, has already received the first tranche under the deal with Investec Bank, UK, and HSH Nord Bank AG of Germany, Deccan Aviation managing director Capt Gopinath said.

Under the deal, Rs 450 crore including an upfront payment would be payable in four tranches over 15 months to Air Deccan subject to compliance of certain financial covenants, Gopinath, who termed the deal "innovative", said.

In turn, Air Deccan has assigned its future aircraft supply contract in favour of a special purpose company, funded by the two international banks, which would carry the transaction, director, finance Mohan Kumar said.

The fund would be used for working capital and to develop the market in future, Kumar said. "This deal would go a long way in ensuring Air Deccan's financial stability and insulating us from the turbulence in the domestic aviation industry," Gopinath said.

The first two larger tranches would be received in the first half of this fiscal and the remaining in the next financial year, Kumar said.

Hit by fuel costs and addition of new aircraft and routes, Air Deccan with a 21.2 per cent market share, had reported revenues of Rs 1,352 crore (Rs 13.52 billion) from April 2005 to June 2006, with a loss of Rs 340 crore.