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Kingfisher Airlines on Borrowed Time

Kingfisher Airlines is struggling more than ever.  It has delayed paying taxes to the government and salaries to its employees in an effort to keep some cash flow for operations.  Despite these efforts, the airline had to cancel dozens of flights on what was a long weekend.  In the wake of these cancelations, executives of the airline have told aviation officials in India that they have cut their flights to 175 per day, which is less than half the number of flights they operated last September.

The reason for these cuts relate to the huge debt both directly and indirectly.  Last week the government froze the airline’s bank accounts after they failed to pay taxes withheld from employee pay cheques and ticket sales.  In addition, a number of pilots quit after not receiving a pay cheque since December.  Kingfisher is not alone.  The aviation industry in India is struggling and every airline in the country is losing money, despite the fact that demand has increased by 20% per year.  High fuel prices, mismanagement, and poor decision-making on the part of the government are being blamed.

Some decisions made recently to help the airlines include allowing them to import fuel directly, avoiding state sales tax of up to 25%, and allowing foreign airlines to buy up to 49% of stakes in Indian carriers.  Unfortunately for Kingfisher, these decisions might have come too late as more and more passengers and travel agents are avoiding the airline due to its numerous flight cancelations.  The load factor for flights in the past month has fallen from 83.6% to 75.2%.

E.K. Bharat Bhushan, director general of civil aviation, said that the government is willing to give the airline time before enacting punishment for canceling flights without giving notice to the regulators.  The airline has a loose plan at this point and is asking the government more time while it searches for much-needed financing.  Bhushan says he hopes their plan works.

 

See the original Google News article for more details.

 

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