Kingfisher Airlines says will pay staff salaries

MUMBAI (Reuters): Kingfisher Airlines will resume payment of staff salaries starting this week after tax authorities unfroze its bank accounts, the airline’s chairman and managing director, liquor baron Vijay Mallya, said in a letter to employees.

Kingfisher’s bank accounts were frozen by tax authorities in February, restricting the carrier’s ability to make salary and other payments to keep its day-to-day operations running smoothly, leading to the grounding of most of its fleet.

Mallya is under pressure from his airline’s lenders to inject equity into Kingfisher, which has debt of $1.3 billion.

Indian airlines have been battered by rising fuel costs, high taxes and fierce competition in a market where five of the six main operators are losing money.

Mallya sent an email to staff on Sunday saying the company would pay salaries to junior staff on Wednesday and to pilots and engineers on April 9 and 10.

“My only focus now is to start paying your seriously overdue salaries,” Mallya said in an email seen by Reuters.

However, employees wrote a letter to Mallya asking that December and January salaries be paid by Tuesday, and those for February and March by April 20.

The letter, an emailed copy of which which was seen by Reuters, and which was posted on the website of a TV channel, did not say what action staff would take if the deadline was missed.

One Kingfisher employee reached by Reuters confirmed the letter had been sent by staff to Mallya, although another employee of the cash-strapped carrier reached by Reuters was unaware of it. Neither was willing to be identified.

A spokesman for Kingfisher, which has never been profitable, declined to comment on the email from Mallya or the letter from staff.

Kingfisher shares, which traded as high as 90.15 rupees just 16 months ago, ended 8.8 percent down at 15.05 rupees, an all-time closing low, on Monday. The broader market ended 0.42 percent higher.

“We are not currently in a mental state to undertake any duties and doing so would jeopardize the safety of our aircraft and more so ever our valuable guests,” the employees wrote, according to the letter.

The bank accounts were unfrozen on Sunday after the airline paid a total of 640 million rupees ($12.6 million) to various tax authorities before March 31, Mallya said.

Kingfisher owes $1.3 billion to banks, including the State Bank of India and ICICI Bank. Mallya is under pressure from the airline’s lenders to inject equity into Kingfisher.

Last month, Kingfisher suspended operations to several destinations under a revised flight schedule, and is halting its overseas flights.

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