AI,Kingfisher accounts frozen for default

Solanki further said both the airlines have defaulted on their payment of the levy though they collected the same from their customers. He also said actions had to be initiated against the airlines because they failed to clear their dues

in the “sufficient time” given to them.

When contacted,an Air India spokesperson acknowledged the development and said it is hopeful of making a part payment to the department today. “Our objective is to defreeze the accounts,” he said.

A Kingfisher spokesperson said,”No comments.”

According to the department,Kingfisher owes the sum for the April-September period and Air India’s is for the period between April and August.

Significantly,for liquor baron Vijay Mallya-promoted Kingfisher,this is the second time within a month that its account has been frozen by the service tax department.

The Kingfisher account was first frozen for two days in the first week of last month and it was only after getting an assurance from the airline officials that they would deposit the dues in three installments that the department lifted its order,Solanki said.

Last week the Mumbai airport threatened to ban Kingfisher for not paying some Rs 90 crore dues accumulated for the past six months and asked to pay upfront every day,which is about Rs 50-60 lakh a day from December 3. Since then the airline has been on a cash-n-carry mode.

Kingfisher plans to raise funds to the tune of Rs 2,200 crore,out of which Rs 800 crore is working capital loan,but the consortium of 14 lenders led by State Bank of India,which has extended some Rs 1,400 crore to the airline,is insisting on fresh capital infusion by the management to the tune of Rs 800 crore.

Already,Kingfishers’ accounts are monitored by the banks and the cash-flow from online bookings directly flowing into an escrow account after the CDR.

Mid-November,airline chairman Mallya had said he was not averse to divesting a part of the promoters stake in the airline to an investor or investors. Already 23.4 per cent of the airline is owned by its lenders after the banks chose to convert Rs 700 crore of their restructured debt into equity capital following an RBI approved CRD package last November. It also has a loan of about Rs 7,060 crore from banks.

Mallya has also put the Kingfisher House,worth around Rs 175 crore,near the airport here on block to raise funds.

Kingfisher has a debt of nearly Rs 12,000 crore as of today and it had more than doubled it Q2 loss to Rs 469 crore despite a 10.2 per cent rise in revenues at Rs 1,528 crore,on the back of a 58 per cent spike in aviation fuel prices during the period.

It is estimated that the airline is making a loss of almost Rs 2 crore a day as it is unable to up fares due to competition.

Its an irony that though the domestic market is one of the fastest growing aviation markets in the world,with 19 per cent growth in passenger traffic in the April-September period,none of the six airlines is in profit,as they are unable to spike fares on the one hand and are paying through their nose for aviation fuel.

When it comes to Air India,the national carrier is sitting on a debt pile of over Rs 64,000 crore. While Rs 42,000 crore of this is loans raised for over 100 aircraft,including 27 Dreamliners the delivery of which will start soon,the rest is accumulated losses and working capital loans.

The national carrier,which is making crores of losses everyday has not paid its 32,000-storng employees for the past four months and is awaiting government bailout as well as corporate debt restructuring.

The RBI has already given an in-principal approval for the same given by 13 banks led by State Bank of India.

Seeking to turnaround ailing Air India,the government is considering a nearly Rs 30,000-crore package over a period of 10 years.

According to industry experts,the domestic airlines are currently selling tickets at Rs 900 discount per seat.