Although a merger with low-cost carrier SpiceJet would have made the Kingfisher-Deccan combine the largest carrier in Indian skies, it would have put a huge burden on the Vijay Mallya-controlled carrier's financials, feel experts.
Also, experts say, with the Kingfisher-Deccan merger being under government scrutiny, regulatory issues could have stymied any attempts made by Kingfisher to merge with SpiceJet.
SpiceJet's losses have almost doubled to Rs 133 crore (Rs 1.33 billion) this year -- of which Rs 123 crore (Rs 1.23 billion) were incurred in the March quarter -- as compared with last year.
According to figures released by the civil aviation ministry for June, the Kingfisher-Deccan combine commanded a market share of 29 per cent as compared with Jet-Jetlite's market share of 29.1 per cent.
A merger with SpiceJet would have left Jet-JetLite more than 10 percentage points behind Kingfisher-Deccan-Spice, which would have had a combined market share of 39.8 per cent.
The merger would also have given Kingfisher a fleet of 98 aircraft, comprising of Airbuses, ATRs and Boeings, bringing it virtually at par with that of Jet Airways.
Also, the consolidation would have left very little scope for small airlines to survive alone. "SpiceJet's merger with Kingfisher would have left carriers like Go Air either groping for survival strategies or waiting for a bailout."
Kingfisher executives agreed that dominating the market and doing away with the low-cost model was their primary intention for the merger.
"There are still too many carriers in this industry and the merger would lead to a much needed rationalisation in terms of pricing and capacity cuts. Though SpiceJet is one of the smarter airlines, we think there needs to be some thinking done in terms of induction of future capacity and pricing. We have always maintained that the low-cost model in India cannot survive," a senior Kingfisher executive had said.
However, experts point out that the Kingfisher-Deccan merger itself is under regulatory issues and another merger without solving those issues would have been unwise.
Last month, the government issued a notice to Kingfisher, accusing it of non-compliance with a provision of the Company's Act, which says that if a merged entity has a market share of more than 25 per cent, it needs prior approval from the Union government for further consolidation.
"Moreover, with 440 daily flights to 63 cities, the Kingfisher-Deccan combine would not have had any advantage in terms of a better network. The Kingfisher-Deccan combine already has flights to every city in SpiceJet's network," said an industry expert.
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