scorecardresearch
Kingfisher Airlines, Air India see fresh trouble over tax dues, salaries

Kingfisher Airlines, Air India see fresh trouble over tax dues, salaries

While IATA ordered over 30,000 of its affiliated travel agents to stop booking tickets for Kingfisher, Air India found its pilots agitating over the non-payment of salaries.

Kingfisher Airlines (KFA), which is staring at terminal financial illness, suffered a crippling blow on Wednesday.

The International Air Transport Association (IATA) ordered over 30,000 of its affiliated travel agents to stop booking tickets for the airline over its failure to settle outstanding dues since February - a move akin to the Reserve Bank of India (RBI) removing a commercial bank from its currency clearing system.

FULL COVERAGE: Kingfisher crisis

Alarmingly, the rot has metastasised to other players in the aviation sector. One such carrier is Jet Airways. It reported protests from employees over delayed salaries and other emoluments.

Another is the state-run Air India.

Bleeding under a mountain of debt, it also almost simultaneously found its pilots agitating vociferously over the non-payment of salaries. Claiming that the management had set itself a deadline of March 31 to clear their dues, they threatened to go on a strike from April 1.

The employees of Kingfisher and Air India have remained unpaid for over three months.

The KFA was dealt two additional jolts on Wednesday. First, the income tax department froze more bank accounts of KFA for non-payment of dues.

Then, oil companies switched off its fuel tap stopping supply across airports over unpaid dues to the tune of Rs 770 crore. Even as sources said negotiations were on, six Kingfisher flights at Mumbai airport were delayed because of no fuel supply.

"IATA has suspended Kingfisher Airlines' participation in the IATA Clearing House (ICH). This is because the airline did not settle its ICH account within the stipulated deadline," IATA announced in a statement.

This development will handicap the airline's ticketing as over 85 per cent of bookings for domestic and international flights is done by agents. It puts a question mark over whether tickets for the carrier can now be booked using globally interconnected systems such as Galelio, Sabre and Amadeus.

Capt. G. R. Gopinath, founder of India's first low-cost airline Air Deccan was of the view that airlines were themselves partially and, in some cases, largely responsible for the crisis they were facing today.

"They have failed to build a sustainable aviation model suitable for the country. Therefore, there is no apparent need for the government to intervene in terms of writing off individual loans or sinking more taxpayers' money to bail out Air India," he pointed out.

CARRIERS ON A NOSEDIVE

State-run Air India is neckdeep in trouble. It has not paid salaries to employees for two months. Pilots have threatened to go on strike. Its loans and dues amount to over Rs 65,000 crore.

And the govt seems to be clueless on how to save the sinking carrier Jet Airways, too, appears to be headed for a crisis.

Employees are angry as their salaries have been delayed for the past four months. In 2009, the airlines operations were grounded because of a pilots strike, causing a loss of over Rs 80 crore. Jet reported a loss of Rs 944 crore in the first nine months of this fiscal

DEEPENING CRISIS

FEB 2, 2012
IATA bars Kingfisher from ticket clearing house system, but reinstates it eight days later

FEB 20
Govt rules out bailout to KFA; abrupt cancellation of dozens of flights cause hardship to fliers

FEB 21
SBI offers Rs 1,500-cr lifeline to KFA; I-T dept defreezes some of its accounts; DGCA chief sets 24-hour deadline for the carrier to come up with a realistic flight schedule but rules out punitive action

MARCH 1-2
Service Tax dept freezes 40 bank accounts for failing to clear dues of Rs 40 cr by Feb 29

MARCH 7
IATA suspends KFA for nonpayment of dues; I-T dept freezes 19 more accounts & issues show-cause notice for not paying tax arrears, oil companies stop fuel supply to KFA
"But none of the government's stimulus plans has had any positive impact on the aviation sector because they are not manufacturers, nor are they considered infrastructure providers," Gopinath added.

Air India's former executive director Jitendra Bhargava told MAIL TODAY : "Most airlines are in deep financial distress because the operational climate is not conducive for profitability." Elaborating further on the issue, he said: "With the aviation turbine fuel prices (which make up 42 per cent of the operating costs) 50 per cent higher than those in the rest of the world and fares much lower than global levels, airline companies are only bleeding, some even haemorrhaging badly." A strong indication of this came from Naresh Goyal-promoted Jet Airways where the airline's pilots started an indefinite protest owing to a delay in payment of their salaries over the last four months.

On Wednesday, the pilots wore black badges as a mark of protest though they reported to work.

Reacting to this news, the Jet Airways stock plunged 4 per cent at the BSE, even as it made up to some extent later to close at Rs 278.80, down 0.84 per cent.

"There is no reason why salary payment should be delayed. We have found out that the management is spending a lot of money elsewhere and deliberately delaying salary payments. But we are not going to call a strike," a senior Jet Airways captain said.

However, Jet Airways denied any protest by the pilots. "We are not aware. Nothing (protest) has taken place. We have not been communicated (about any protest)," Ragini Chopra, vice-president, Corporate Communications, said.

Industry experts expect IATA's move to affect up to 35 per cent of KFA's business. "Kingfisher's participation in the ICH will be reinstated after the airline fulfils ICH requirements," IATA specified.

IATA had previously barred Kingfisher from its ICH on Feb-ruary 2, but reinstated it eight days later after some payments were made. The action also comes in the wake of KFA abruptly cancelling scores of flights for over three months.

KFA, for its part, said: "Owing to the bank accounts getting attached by the tax authorities, we were not able to make a payment to ICH. This resulted in a temporary suspension. We expect the accounts to be unattached shortly. As soon as this is done, we will pay our dues to IATA and get reinstated." The airline claimed: "We continue to operate 200 flights to 46 domestic and international destinations. The ICH suspension does not impact our guests."

Courtesy: Mail Today