Opinion: A date of ignominy in the Kingfisher Airline calendar

2010 Kingfisher Calendar. Copyright KingfisherWorld

Kingfisher is known for its super-sexy swimsuit calendar, featuring some of the most beautiful women in the world, and Kingfisher Airline's Chairman Dr. Vijay Mallya's son, Sidhartha, may love cavorting on the beach with them, but yesterday, October 4, 2012, witnessed a tragedy, and was, to borrow the words of FDR, a date that will live in infamy for the financially imploding airline.

The wife of one its employees committed suicide due to non-payment of her husband's salary for over six months.

Sushmita Chakraborti was not a model on a fancy calendar, nor would either of the Mallya father or son, like to cavort on the beach with her; she was the poor, 45 year old wife of a retired Indian Air Force officer, Manas Chakraborti, who is working, salary unpaid, as an engineer with Kingfisher Airlines. Living in a LIG (low income group) housing colony in airport suburb of Dwarka, in New Delhi, where she hung herself, she was the mother of an 18 year old college going son.

CNN-IBN reports, in her suicide note, Sushmita wrote,

"My husband works with Kingfisher where they have not paid him salary for the last six months. We are in acute financial crisis and so I am committing suicide"

Mrs. Chakraborti's suicide has stained in blood the Kingfisher Airline's image, and forever damaged the already tarnished the Kingfisher brand, once valued at over Rs. 1,000 Crore. The contagion is already spreading. The Reserve Bank of India has already instructed banks not to use the brand as collateral for loans.

Her death is in stark contrast to the extravagant uber-lavish lifestyle of the Mallyas, which has been loudly condemned across the country, yet shows no sign of abating. Even as Sushmita was dying, Dr. Vijay Mallya was overseas, reportedly on a vacation, leaving the airline CEO, Sanjay Aggarwal, to meet with Government officials, Kingfisher pilots, engineers, and other employees, with the same helpless platitudes that has plagued the airline for over a year. He too, he says, has not been paid his salary.

While many Kingfisher employees held candlelight vigils around the nation, in support of the grieving family, CNN-IBN reported, the airline’s company secretary Bharath Raghavan resigned.

Yesterday too, the airline extended the lockout to October 12, 2012, blaming the employees for "illegally" striking. Talk about the pot calling the kettle black.

Last yesterday, in a clear sign of the political clout of Vijay Mallya, the Income Tax department agreed to unfreeze the airline's bank accounts containing about Rs. 60 Crore. The authorities had frozen these accounts in May this year, when Kingfisher failed to deposit the withheld income taxes, deducted from employees salaries, since March 2009. This apart from non payment of service tax to the Excise department. It is important to note, that there is no sign that either Kingfisher Airlines or Dr. Mallya have cleared this liability.

Continuing the clout, the banks, who are owned more than Rs. 8,000 Crore by Kingfisher, and who, by their own admission, do not have collateral worth more than 10% of the loans, have agreed to release this money towards payment of employee salaries. Now, whether this money will be disbursed to the unpaid employees or squandered in more fancy lifestyle displays, is not known.

As this tumultuous week comes to a close, we offer our sincerest condolences to the Chakraborti family, and condemn the actions of the airline, its leader, and all his political benefactors who have allowed circumstances to degrade in to an abyss, resulting in this tragic act of desperation. Yesterday was a day of ignominy for you Dr. Mallya.

Comments are welcome. Messages of support are welcome. Any defence of Kingfisher or Dr. Vijay Mallya is very welcome. And last but not the least, please do cast your vote in our survey whether Kingfisher Airlines should be allowed to continue or be closed.

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Income tax department re-freezes Kingfisher Airline's bank accounts

The income tax department has frozen two of Kingfisher Airline's bank accounts for alleged non-payment of dues.

However the airline has clarified in a statement

The IT department attached two of our bank accounts on May 24th which was not in accordance with the speaking order of the Hon'ble IT Appelate tribunal during the hearing.

Subsequently, in a written order of May 25th the tribunal set aside the entire demand made by the IT assessing officer. As such there are no tax dues to be currently paid and the attachment orders on two bank accounts have to be lifted.

So the financially strapped carrier will face a few days of trouble till the income tax department will send a release instruction to the banks, something it is loathe to do.

The airline had an income tax outstanding of about Rs. 370 Crore which is essentially the taxes it withheld from employee salaries as TDS (tax deduction at source), but has not remitted to the department.

In March this year, Kingfisher had withdrawn from the international airline body IATA and took back its deposits of around $8 million. It used these funds to deposit Rs. 44 Crore (approx. $8.8 million at March exchange rates) with the income tax department which caused the Income Tax Tribunal to un-freeze its bank accounts. The airline had also promised to make weekly payment in instalments of Rs. 9 crore.

The airline is now operating on a highly truncated schedule using only 16 aircraft and has dropped from being the second largest domestic carrier in India to the smallest.

The airline also has estimated outstandings of Rs. 40 Crore payable to the service tax department.

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Kingfisher Airlines blames crisis on income tax department for seizing its bank accounts

In a statement to clarifying the on-going crisis, Kingfisher Airlines has virtually blamed the Income Tax department of India for seizing the airline's bank accounts. Since the airline has never made a profit since commencement, the airline would not be past due on income tax. What it could be past due on, is, Tax Deduction at Source (TDS).

Tax Information Network

Entities (both corporate and non-corporate deductors) making payments (specified under Income Tax Act) to third parties (deductees) are required to deduct tax at source (Tax Deducted at Source -TDS) from these payments and deposit the same at any of the designated branches of banks authorised to collect taxes on behalf of Government of India. They should also furnish TDS returns containing details of deductee(s) and challan details relating to deposit of tax to ITD.

Failure to remit these taxes collected on behalf of the government can invite rigourous imprisonment of three to seven years.

In the spirit of "no-spin" (yes I like Bill O'Rielly), we reproduce the statement without any edits. Some clarifications are marked with [square brackets].

Mumbai, 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 [Group Of Ministers] meeting which will benefit the industry and also Kingfisher Airlines. [Referring to approval of 49% FDI by foreign airlines and direct import of aviation fuel.]
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.

Credit to the airline, the statement is a true, even if damning, recitation of the situation; but to blame the tax department when you have defaulted ?!?!?! takes guts, even if they are completely darned crazy.

Along with our regular readers, it will be great to hear from regular Kingfisher passengers and members of King Club their views on the latest developments.

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