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Kingfisher: Flying on empty?

The airline is in the news for all the wrong reasons: accumulated debts of over Rs 5,000 crore, accumulated losses of a few thousand crore, unpaid creditors, unpaid employees, cancelled flights and striking crews. The list does not seem to end.

Kushan Mitra | February 21, 2012 | Updated 09:32 IST

Kushan Mitra
Kushan Mitra
Kingfisher Airlines just can't seem to stay out of the news. During the first few years of its life, it was for all the right reasons - brand new planes, great service, pretty girls and so on. Now, the airline is in the news for all the wrong reasons: accumulated debts of over Rs 5000 crore, accumulated losses of a few thousand crore, unpaid creditors, unpaid employees, cancelled flights and striking crews. The list does not seem to end.

While visitors to Kingfisher Airlines' web page would think that everything is hunky-dory, there is no mention of the troubles or any link for affected passengers on the home page the last time Business Today checked, the airline did issue a statement earlier today. We are reproducing the statement in its entirety.

New Delhi, February 20, 2012-Kingfisher Airlines Ltd. would like to reiterate and clarify as follows:

1.    The prime reason for the current disruption in our flight schedules is the sudden attachment of our bank accounts by the IT department. This has severely affected our ability to make operational payments leading to the present curtailment. The revised schedule has been updated in the system.
2.    We are in dialogue with the tax authorities to agree 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.
3.    Employee salaries can be paid and the grounded aircraft can be recovered quicker once the bank accounts are unfrozen and the schedule restored on priority.
4.    About 15% of our flights operating consistently for the past 3 months have been cancelled and we have done and are doing our best to inform guests in advance of cancellations and clubbing and to re-book them on other carriers.
5.    If the guests so desire, we are offering them a full refund.
6.    Our teams are in close touch with our travel trade partners to keep them abreast of the disruptions so that they too can, in turn, ensure that guests contacting them / booking via them are kept updated of any changes.
7.    We've been in touch with the DGCA to keep them informed of the disruptions.
8.    We will appear before the DGCA tomorrow and submit all details they want and also a plan to restore the full schedule.
9.    We would like to reassure our valued guests that there are absolutely no safety issues with the aircraft that are operating.
10.    We have had a constructive meeting with our bank consortium last week.
11.    As stated earlier, we have not approached the Government of India for any "bail out".
12.    We understand from media that certain positive decisions were taken at a recent GOM meeting which will benefit the industry and also Kingfisher Airlines.
13.    We have adequate numbers of flight crew and cabin crew to operate our schedule of flights.

Kingfisher Airlines deeply regrets the inconvenience caused to its valued guests on account of the current disruptions.
As the day has progressed, we have discovered the following things.

  • Kingfisher has cancelled almost half of the flights from its already restricted schedule.
  • Only 16 out of the airlines fleet of 64 aircraft are flying
  • Kingfisher Airlines CEO, Sanjay Aggarwal will meet with the Director General, Civil Aviation on Tuesday
  • In the midst of campaigning in western Uttar Pradesh, Ajit Singh, the Civil Aviation Minister, has stated that the government will not 'bail out' Kingfisher Airlines
  • The proposal for increased foreign investment and direct investment by foreign airlines into domestic carriers is struck in bureaucratic red-tape

As of right now, it is impossible to confidently predict whether Kingfisher Airlines will be flying tomorrow. Even though several analysts and insiders believe that Kingfisher will survive the next few days, the situation is dire.

The fact remains that Kingfisher Airlines deducted TDS from employees salaries and did not deposit them with the authorities, leaving the IT Department little choice but to act against the airline. However, employees who have not been paid will see whatever they are owed also go up in smoke if the airline collapses soon, and they will end up being unsecured creditors.

Will Kingfisher be saved?


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