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Business News/ Companies / Kingfisher pilots plan stir over delayed payments
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Kingfisher pilots plan stir over delayed payments

Kingfisher pilots plan stir over delayed payments

Funding concerns: Chief executive Sanjay Aggarwal on Sunday did not discuss outstanding salaries, but said the airline had priorities of paying dues to the Airports Authority of India. Photo: RaveendrPremium

Funding concerns: Chief executive Sanjay Aggarwal on Sunday did not discuss outstanding salaries, but said the airline had priorities of paying dues to the Airports Authority of India. Photo: Raveendr

Mumbai: Some pilots of Kingfisher Airlines Ltd on Sunday threatened to agitate for outstanding salaries if they are not paid by 12 March, even as tax authorities froze another seven bank accounts of the beleagured carrier on Friday because it has not paid its dues.

Funding concerns: Chief executive Sanjay Aggarwal on Sunday did not discuss outstanding salaries, but said the airline had priorities of paying dues to the Airports Authority of India. Photo: Raveendran/AFP.

Kingfisher Airlines, which has not made a profit since its inception in 2005, is struggling to get an immediate fund infusion and is flying only 28 planes, compared with 64 two months ago, owing to the cash crunch.

India’s aviation regulator summoned the airline’s management last month as the carrier has been cancelling 65 flights a day since 17 February without informing the regulator. A year ago, Kingfisher was operating 340 flights a day.

The service tax department on Friday sealed seven more bank accounts of the airline because of non-payment of dues, taking the total accounts frozen to 44. A service tax department official said his department “will come down heavily" against the airline if it fails to clear the dues. Kingfisher’s total outstanding to the service tax department is around 50 crore. The official did not want to be named.

Kingfisher employees, including pilots, have not been paid since December. On 28 February, chairman and managing director Vijay Mallya wrote to the employees saying he had organized money to pay tax dues and salaries in a week.

“We have not (been) paid since December and many among us are facing troubles of defaulting EMIs (equated monthly instalments) and getting evicted from rented homes," said a Kingfisher Airlines pilot, requesting anonymity. “There is no solution in sight."

He said chief executive Aggarwal on Sunday did not discuss outstanding salaries, but said the airline had priorities of paying dues to the Airports Authority of India, oil marketers and the income-tax department.

Another airline executive, who also declined to be named, said transport reimbursement for the crew was stopped on Sunday and Aggarwal was non-committal when pilots threatened to leave.

“The chief executive officer was not ready to pay the outstanding. With the revised and reduced network, the airline needs only 200 pilots against the current strength of 540," the executive said. “We have sought a meeting with Vijay Mallya."

Phone calls and text messages to Aggarwal did not elicit any response.

“Sanjay Aggarwal met with a group of pilots to appeal to them not to stay away from flying duties, which would potentially affect the operating schedule. At no time was there any suggestion that Kingfisher Airlines would shut down," said Prakash Mirpuri, a spokesman for Kingfisher Airlines. “We are trying our very best to cooperate with the tax authorities and get our accounts un-frozen at the earliest so that normalcy could be restored, employee salaries paid and further aircraft recoveries started."

Kingfisher Airlines had a debt of 7,500 crore on 31 December. It posted a loss of 1,027 crore on sales of 6,496 crore for the year ended 31 March 2011, compared with a 1,647 crore loss on sales of 5,271 crore in the year before.

A group of 13 lenders, including State Bank of India (SBI) and ICICI Bank Ltd, bought a 23.21% stake in the airline in April. SBI picked up a 5.67% stake and ICICI Bank, 5.3%.

The airline converted 750 crore of its total debt of 7,000 crore into equity at a 61.6% premium over its share price in what many considered a sweetheart deal. It allotted shares to lenders on 31 March at 64.48 apiece.

It is now struggling to get another round of funding from banks. SBI chairman Pratip Chaudhuri has asked Kingfisher to raise 1,000-2,000 crore before the banks can lend it more money.

Financial auditors of listed airlines have cautioned that accumulated losses of $6 billion in the past five years are eroding the net worth of the carriers, putting them in a desperate situation to raise fresh funds.

India’s stressed airline industry will have to find innovative sources of funds, with traditional avenues drying up as a record $2.5 billion loss will be added in the current fiscal year and as existing providers of capital are nervous about the sector’s viability, according to consultancy firm Capa (Centre for Asia Pacific Aviation).

Kingfisher Airlines had said last year it planned to raise $250 million through a global depository receipts issue. Later, it said it would raise $400 million from a rights offer.

Rashesh Shah, senior analyst at domestic brokerage ICICI Securities Ltd, in a 1 March report cautioned that Kingfisher Airlines’ market share will fall further as the airline is operating at 27% less capacity compared with last quarter.

“With this, supply cuts and offering of seats at discounted rates, its revenues and market share are going to be impacted severely in future, albeit with lower operational losses," Shah said. “For the survival of the business, the promoter will either have to infuse significant funds into the company or bring in strategic partners with infrastructure for ATF (aviation turbine fuel) import or some foreign carriers."

Shah added that even if Kingfisher Airlines “is able to bring down its debt to 6,000 crore as per their guidance, the running of the business will continue to remain a very tough job due to an unfavourable operating environment where ATF prices are once again on a rising trend."

Shah had recommended investors to exit the stock as it would be a tough job for the company to service its huge debt with lower earnings.

Khushboo Narayan contributed to this story.

pr.sanjai@livemint.com

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Published: 04 Mar 2012, 10:43 PM IST
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