The country’s largest low cost passenger airlines Deccan Aviation Ltd (DAL) announced on Wednesday that the UB group-owned Kingfisher Airlines will be merged with it.

Vijay Mallya’s UB group already owns 46 per cent of the equity in DAL after it bought a 26 per cent stake in the company and acquired another 20 per cent through an open offer.

According to the announcement, at a press conference late in the evening, the merged airlines will be renamed Kingfisher Airlines and as a corporate entity it will be a subsidiary of UB Holdings.

The accounting firm KPMG will work out the valuations of two companies and suggest the share exchange ratio.

The airline will maintain services under two brands — ‘Kingfisher’ for full service and ‘Simplyfly Deccan’ for low cost, no frills service.

Talking to a TV news channel Mr Vijay Mallya, chairman of UB Group, pointed out that he will be the chairman and CEO of the merged entity and Captain Gopinath, the founder promoter of DAL will be the vice chairman.

The merger plan is a follow up action on the report filed by the consulting firm Accenture which was appointed in September this year by the UB Group to explore synergies between the two airlines.

After merger, the two airlines together will have a fleet strength of 80 aircraft — 37 Kingfisher and 43 Deccan.

Together they will fly to 570 destinations.

A reason

Industry observers feel that one of the reasons behind the merger is the UB Group’s plan to fly abroad with Kingfisher Airlines using Deccan’s eligibility under Government’s aviation policy.

Mallya also pointed out that Kingfisher will start its international operations from August 2008 with wide bodied Airbus 320 aircraft.

Meanwhile, Deccan Aviation announced on Tuesday that during April-November period this year, it has recorded 23 per cent increase in passenger volume compared to same period last year.

This year Deccan has already flown 6.79 million passengers as against 5.55 million last year.