MRIDUSHRI MUNDHRA

ROLL NO. 160

ECONOMICS PPT
KINGFISHER AIRLINES SCANDAL

 Kingfisher airlines was established in

2003 but it started in 2005. It is based in
Bangalore.
By early 2012, the Airline losses of over
7,000 crore due to strike & other problem.
The current scenario is that the DGCA
suspended its flying license on october
20,2012.
KFA has temporarily shut down its
operations.
Due to financial problem it has reduced
the fleet from 63 to 16.

FINANCIAL CRISIS AND ITS

CONSEQUENCES.
The KFA crisis refers to a series of events that led
to a severe disruptions within KFA.
Ever since the airline commenced operations in
2005, it has been reporting losses.
After acquiring Air Deccan, KFA suffered a loss of
over 1,000 crore for 3 consecutive years.
By early 2012, the airline accumulated losses of
over 7,000 crore.
This resulted in delay of salaries, strike, top
position slipped, its half of its fleet grounded,
etc.

START OF THE CRISIS :

The start of crisis was the freezing of bank
accounts of the airline by the income tax dept.
As on 10th Jan 2012, KFA has service tax arrears of
60 crore.
KFA has not been depositing service tax collected
from passenger with the dept. since November
2011 on regular basis and instead has been
diverting it for other purpose on regular basis.
ACCUMULATED DEBT ARE AS FOLLOWS :
KFA has a debt on Rs 8030 crore.
KFA has been loosing money from day one and
has accumulated losses around Rs 8000 crore.
Cumulative due exceeds Rs 15000 crore.

PAYMENT PROBLEMS :
KFA has staff strength of 6000 and spends 58
crore on salaries a month.
Airlines delayed salaries of its employees for 4
months in succession.
KFA also defaulted on paying the Tax Deducted
at source from the employee income to the
tax dept.

CONCLUSION :
Financial crisis of KFA was due to high fuel
prices, overspending, deregulation act,
business model was not effective, highly
competitive industry, etc.