"We should be doing flown revenue of close to Rs 290 crore (Rs 2.9 billlion) this month and on that sort of revenue airlines do make money," Nedungadi said.
This information comes days after Kingfisher Airlines announced it will merge with Deccan Aviation. Both companies reported losses of about Rs 500 crore (Rs 5 billion) last fiscal.
Nedungadi said the new merged entity, which will be named Kingfisher Airlines, will post profits in FY09 as it will pull all levers to extract value from its combined fleet of about 80 aircraft.
"We will certainly report a profit. We can already see big changes happening month after month. And with monthly flown revenue of close to Rs 300 crore (Rs 3 billion), we should be making money in December. We are going to drive this merger very hard," Nedungadi said.
The new entity is expected to leverage the enormous scale which this merger will bring to the table.
"For example, if we can negotiate a one per cent discount on the fuel we buy, promising immediate payment instead after 15 days, it will translate into Rs 1,800 crore (Rs 18 billion) gain annually. This is just one of the levers and the Accenture report on synergies between Air Deccan and Kingfisher Airlines makes many such points," the UB executive explained.
According to Nedungadi, the merged company will have to raise about $300 million in equity during early next fiscal.
"We were against giving up equity during our early days and we relied on debt to expand our operations. The time has now come to take another step towards profitability, which is to replace some of the debt through equity," Nedungadi said.
The UB Group CFO said that generally getting money was not easy. "So I would expect that over six months or so, money would become expensive. If we are able to replace some of the debt with equity, then it just helps to improve the profitability," he said.
