Mayday for Kingfisher as accounts are frozen

Vijay Mallya-run Kingfisher Airlines ( KFA) has plunged into a fresh crisis with the tax authorities freezing the company’s bank accounts for failing to pay up its dues which has forced the debt-ridden airline to cancel as many as 32 flights.
With the grounding of several Kingfisher planes, airfares have shot up as rival airlines are getting more passengers. Kingfisher owes around Rs 190 crore to Income Tax and Service Tax authorities towards non- remittance of Tax Deducted at Source (TDS) from employees’ salaries and service tax dues.
 “We confirm that our bank accounts were attached by the tax authorities. However, this has happened in the past not just to us but also to Air India. We have resolved issues before and will do so again,” said Kingfisher Airlines spokesperson Prakash Mirpuri in a statement. On Friday, when the KFA top brass was urging lenders to provide additional working capital, employees in Kolkota resorted to a flash strike due to non- payment of salaries and soon after all flights from the city were cancelled. More flights were cancelled from other stations, including some international ones, on Saturday and Sunday causing inconvenience to passengers. “We would like to categorically state that neither we have shut any stations nor have any intention of doing so. There have been flight disruptions, which will continue for four days, due to unexpected events, including bird hits, which rendered aircraft out of service. We, therefore, could operate only 208 daily flights (from 240 flights a day),” Mirpuri added. He said that the airline will operate the full schedule within the next four days.
Meanwhile, the Directorate General of Civil Aviation has initiated an inquiry into the sudden cancellations. KFA, which has been urging banks to provide additional funds for a turnaround, is working to arrest losses estimated to be around Rs 5 crore a day going by Q3 results. But banks are asking for more equity infusion by promoters.
“We have had a good meeting with our consortium of banks, which have accepted, in principle, the viability study prepared by SBI Capital markets and independent consultants. Our request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals.”
As KFA cancelled more flights, airfares in the affected sectors have gone up by 20 per cent in this lean season. Had it been in December, the impact could have been much more. “On an average, fares have seen a rise of 20 per cent due to capacity reduction. Other airlines will fill their seats in the highest slab fare causing hardship for passengers,” said Anup Kanuga, director, Bhatija Travels.
“Kingfisher is pulling out of loss making routes. Kolkata and Chennai are loss making sectors for all airlines and it does not make sense to operate there. Kingfisher will curtail its operations” said Lalit Sheth, CMD, Raj Travel World.