Frozen bank accounts led to disruptions: Kingfisher

Airline owes I-T dept Rs 130 crore Rs 43 crore in service tax

On the eve of a crucial meeting with the Directorate General of Civil Aviation (DGCA), Kingfisher Airlines has said its current flight disruptions have stemmed from a “sudden attachment” of the company’s bank accounts by the Income Tax (I-T) department.

“This disruption has severely affected our ability to make operational payments, leading to the present curtailment,” said a release from the beleaguered airline. “We are in dialogue with the tax authorities to agree to a payment plan and get the bank accounts unfrozen at the earliest. We are appealing to them to see reason that inconvenience to the travelling public is not in anybody’s interests.”

The airline had earlier said the disruptions are because of grounding of planes for maintenance due to bird hits.

Mumbai-headquartered Kingfis-her owes Rs 53.8 cr for 2010-11 and Rs 100 cr for 2011-12 to the tax department. Of the total amount of Rs 153.8 cr, the tax department collected Rs 21 cr till December 2011. Kingfisher filed a commitment letter to pay balance Rs 130 crore TDS liabilities by the end of the current financial year.

In December last year, the service tax department had frozen the bank accounts of Kingfisher, but de-frozen it later after the air carrier made part-payment of its service tax dues. The debt-laden firm had paid tax dues of about Rs 27 crore until last month, against Rs 70 crore which it owed to the service tax department. It is expected to pay the remaining dues by next month.

Employee salaries can be paid, and the grounded aircraft would recover once the bank accounts are unfrozen and the schedule restored on priority, the release said.

On its part, the DGCA has summoned Kingfisher Airlines Chief Executive Officer Sanjay Aggarwal after it cancelled flights since Saturday. This is the second time since November that the company has cancelled flights and not informed the sector regulator. The DGCA had then asked the airline to share its operational plans and follow it and inform the regulator in case of any change.

DGCA Director-General E K Bharat Bhusan had said his office was not informed about any cancellations. The airline, however, said in the release that it had been in touch with the DGCA to keep the authority informed of the disruptions.

Meanwhile, cancellations by Kingfisher have led to a doubling in the last-minute air fares, according to MakeMyTrip. “This is more so in the key metro sectors of the country,” said Keyur Joshi, its co-founder and chief operating officer.

“The metro routes carry around 50 per cent of the traffic and the fares in the metro sectors have increased by 20 per cent,” said Ajay Prakash, president, Travel Agents Federation of India.

‘Not closing down Kingfisher’
While talking to a TV channel on Monday evening, Chairman Vijay Mallya said, "I have no plan of shutting down the airline."

He said it was ironical that the airline could not utilise funds as its accounts were attached by I-T department. "We have the money but can't use them. We are crippled,'' he said.

Mallya also demanded a change in government policies which were hindering its growth. He said three investors were ready to put in the money but were hesitant as the government policies were not clear.

‘Have adequate crew to operate flights’

According to airline sources 35 pilots quit the airline last week without serving notice. "Most of them are joining IndiGo, which had promised bonus if they accept the offer by February 15,'' the source said. An equal number of pilots from Delhi have refused to fly since the last week, protesting delays in salary. “The agitating pilots told the airline that they are under pressure and not under the right frame of mind,'' the source added.

In the last two months, over 60 pilots have quit and some of them are serving the six month notice period. In the last year alone, about 100 pilots left the airline to join rival carriers in India and abroad. At that time airline insisted that the pilots complete the mandatory six month notice period but later waived off the condition following DGCA intervention.

"The airline will find it difficult to stabilise the operations as large number of pilots are quitting,'' a senior captain said. He said till about six months back pilot strength was about 500 and that has shrunk to around 350.

Kingfisher did not respond to a specific query regarding 35 pilots resigning but in a general media statement said, “We have adequate number of flight and cabin crew to operate our schedule of flights.”

The salaries have not been paid to Kingfisher staff for the past two months. A Kingfisher commander gets Rs 2.5-3.5 lakh as basic salary, depending upon seniority. Along with allowances, it works to around Rs 5 lakh each month.

On Saturday, Kingfisher chairman Vijay Mallya wrote to staff, "I am painfully aware of the continued delay in salaries and its impact on your personal lives. We had to make several large unanticipated payments to IATA. Later in the week, the tax authorities suddenly attached our accounts blocking our limited cash available. We are working to resolve this issue in the next few days.''