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Wed, May 24, 2006

Air Deccan IPO Flops

Costs Discourage Investors

That big "thud" you may heard from over the horizon came from India... where low-cost carrier Air Deccan's initial public stock offering was just a little disappointing.

Reuters reports Air Deccan executives had hoped to do at least half as well as Reliance Petroleum of India, which raised $600 million in its initial public offering last month.

For that matter, rival Jet Airways was able to raise $434 million in 2005... but there've been major disagreements over the valuation of each share of Air Deccan, and no investor likes that kind of dispute.

Of course, it also doesn't help that the Indian stock market is in something of a tumble right now -- suffering record losses. And with other low-fare carriers lining up in the wings with public offerings of their own, Indian investment gurus are warning their clients away from the industry.

Those analysts say the key to a low-fare carrier is low costs... and high returns. With some seats going for as little as $5 each way... that may be a lesson some of these carriers learn the hard way.

FMI: www.airdeccan.net

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