Liquor baron Vijay Mallya, whose UB Group recently bought 26 per cent stake in Deccan Aviation for Rs 550 crore, on Tuesday said fares of low-cost carrier Air Deccan could go up by Rs 500 as it was necessary to post profits.
"I do not believe in low-cost operations and running at losses and for that if fares have to go up so be it," Mallya said, adding the company was in the business to make money.
"Deccan is going to raise prices and be profitable," Mallya, who heads Kingfisher Airlines, said.
Airfares should reflect exact costs, including ATF and congestion charges. Air Deccan can cover these costs and still remain competitive, he said.
"Gone are the days when they (low-cost carrier) sold low-cost tickets to gain market share. Air Deccan has huge connectivity and I believe only Rs 500 more would make it profitable," he said.
"While Air Deccan Founder Captain Gopinath has defended his model, I told him that you have to ensure that you reap the due benefits. I am of the sincere opinion that any other carrier would not indulge in discounting money," Mallya added.
Mallya said Air Deccan has a huge network, which is an asset waiting to be leveraged. Making a case against reducing airfares, he said there was a lot of cut-throat competition in many businesses but no one sells below cost.
Ruling out any plans of an IPO, Mallya said he had three term sheets as investors were bullish on the merger.
On consolidation in the domestic aviation industry, he said there was scope for further consolidation, but any such imminent consolidation was not possible.
Mallya said Air Deccan would continue to cater to price conscious traveller henceforth mineral water would be served free of cost in a flight.
He argued if the government wanted to ensure a vibrant aviation industry, it should give ATF the declared goods category status which dents the economics of the airlines.
"Oil Marketing Companies (such as IOC and BPCL) should be far more realistic in their pricing as they export cheaper but charge more from the domestic carriers," he added.