Trying to scotch speculation of a shut down, cash-strapped Kingfisher Airlines on Sunday said it was in talks with tax authorities to get the accounts of the airlines un-frozen and asked its pilots, skipping flying duties, to fall in line.

But pilots protesting delay in payment of salaries claimed that Kingfisher CEO Sanjay Aggarwal had warned them during a meeting on Thursday that the extreme step could be resorted to, indicating the airlines’ closure, if they don’t resume duties.

“Sanjay Aggarwal met with a group of pilots to appeal to them not to stay away from flying duties which would potentially affect the operating schedule. At no time was there any suggestion that Kingfisher Airlines would shut down,” a statement by Prakash Mirpuri, vice president, corporate communications of the airlines, said.

“We are trying our very best to cooperate with the tax authorities and get our accounts un-frozen at the earliest so that normalcy could be restored, employee salaries paid and further aircraft recoveries started,” he said.

A different version of the meeting was given by the pilots.

“If you want to fly, you fly and if you don’t want to fly, you are free to do so. Otherwise, we will have to think of the extreme option (of completely closing),” the pilots quoted Mr. Aggarwal as having told them.

Mr. Aggarwal also told the delegation he cannot commit anything before March 10, a pilot, who was part of the delegation, said.

The development comes on the heels of the service tax department freezing as many as 40 bank accounts of Kingfisher Airlines for non-payment of dues to the tune of Rs 40 crore.

Civil Aviation Minister Ajit Singh has indicated that flight license could be temporarily suspended, instead of being cancelled, to give the airline a chance to resume operations once it sorts out its problems.

The aviation regulator DGCA has already warned Kingfisher that its financial problems should not impinge on safety.

A senior pilot, who was part of the delegation told PTI that Mr. Aggarwal was “non-commital” on heeding to their demand of clearing the dues, which have been pending since December.

Interestingly, Mr. Aggarwal’s remarks to senior pilots came close on the heels of the airline’s flamboyant promoter Vijay Mallya promising to clear the dues soon, saying he had organised the funds.

It is the fourth such time in as many months that the service tax department has frozen its bank accounts. Late last month, the income tax department had also frozen the bank accounts for not depositing the TDS.

Chairman of the Central Board of Excise and Customs, under which the service tax department falls, S K Goel had on February 22 said the airline had to clear Rs 70 crore in dues before March 31.

The airline has been in a financial mess and is unable to meet its obligations, including paying salaries to its employees, clearing tax arrears and payment to vendors, for months now.

Following continuous non-payment of salaries, late last week a section of its engineers went on a ‘tools-down’ protest for a day.

As the crisis deepened when salaries were not paid, several employees including some pilots quit the airlines.

Over 60 pilots have left in the past few months.

The airline reduced its flights beginning mid-October.

From 400 flights a day it had sought permission for during the October-March period, it is down to only 170 daily flights now, using just 28 aircraft of 64.

The airline, which never made a profit since its inception in May 2005, reported a net loss of Rs 444.26 crore in the December quarter, due to high fuel costs and weaker rupee, up from Rs 253.69 crore a year ago.

It suffered a loss of Rs 1,027 crore in 2010-11 and has a debt of Rs 7,057.08 crore on its books apart from over Rs 4,000 crore of accumulated losses and a restructured long-term loan of around Rs 7,000 crore.

The cash starved airline has not been able to get fresh funding from banks, as a 19-member bank consortium has made it clear that the promoters must bring in at least 50 per cent of its fund requirement in fresh equity as a pre-condition for any new funds.

The airline urgently needs at least Rs 2,000 crore working capital to remain afloat.

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