Zoo Station

I have a little game going on with some of my friends to place bets on which Indian airline will go out of business first. Given the cutbacks on routes and redeployment of airplanes, most of us came to the conclusion that Jeh Wadia's Go Air would be the first to exit the ruthlessly competitive Indian airline space, where survival has become synonymous with the airline's ability to withstand mounting losses. Turns out we may have been wrong, if this Mint story on Air Deccan can be believed. Apparently, Air Deccan is dangerously close to running out of all its equity.

On 31 March, the day the company closed its books for the last quarter, Deccan Aviation, which runs Air Deccan and a small helicopter charter operation, had not more than Rs42 crore in equity, and, perhaps, even less than that in available cash for its day to day operations, according to Mint’s analysis.If the airline is losing money at the same rate today as it did in the January-March quarter—about Rs2.36 crore a day—that equity has likely been already depleted.

“Excluding the IOU that Deccan has from Investec, we estimate that Deccan has close to zero residual equity,” JP Morgan Chase analyst Peter Negline wrote in a note to investors on Friday, referring to instalments from a UK bank still due to the company from a deal completed last year. “If they cannot find private equity to inject funds immediately, we believe that their departure from the market is imminent.”

I am flying Deccan in a couple of days, and from all outward appearances, there seems to be no sign of pending trouble. In fact, as Mint says, they've even floated a new round of 100,000 free tickets. Is this just bravado or is there something wrong with the doomsday analysis?