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Loss-making national carrier Air India and cash-strapped Kingfisher Airlines suffered further blows to their credibility after several of their bank accounts were frozen by the Mumbai service tax department for non-payment of dues.
While the accounts of Air India were de-freezed after the airline made a partial payment on Thursday on the Rs 100-crore dues it owes to the department, Kingfisher officials did not offer any comments on the freeze on its bank accounts.
Air India made a payment of Rs 15 crore today following which its bank accounts were de-freezed, an Air India official said.
The Vijay Mallya-owned Kingfisher Airlines, reportedly, has to pay Rs 70 crore to clear its service tax dues. The private airline defaulted on paying service tax despite collecting it from its flyers. Usually, airlines charge Rs 155 a ticket on their domestic sector towards service tax and Rs 773 on international journeys in economy class.
This is the second time that Kingfisher's accounts have been frozen in the last two months. The accounts were first frozen for two days in the first week of November and it was only after getting an assurance from the airline officials on payment of dues in three instalments that the service tax department lifted its order. Bankers said that the service tax department would have frozen the accounts in which credit card receivables and ticketing monies are credited.
The Mumbai International Airport Ltd (MIAL) had put Kingfisher Airlines on a cash-and-carry mode from December 3. The airline company needed to pay Rs 60 lakh daily to MIAL for operating flights to and from Mumbai. The company defaulted on payments to MIAL for the past six months and owes it Rs 90 crore.
The company is struggling to meet its working capital needs and is seeking relief from lenders. Banks have an exposure of about Rs 40,000 crore and Rs 7,000 crore to Air India and Kingfisher Airlines respectively. They are currently assessing the viability of both the airlines.
Bankers are worried that the Kingfisher account could turn into a non-performing asset by month-end if the restructuring proposal, entailing the promoter bringing in his contribution and banks extending fresh line of credit, does not materialise.
Pilots' grievances
Meanwhile, adding to the woes of Kingfisher Airlines, some of its pilots who have not been paid salaries for a couple of months have now gone public with their grievances. The pilots reportedly used the public address system on their aircraft to air their grievances.
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