Kingfisher turns ticketing agents into financiers
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Kingfisher Airlines chief Vijay Mallya has struck on a strategy to raise money from its ticketing agents.Economic Times said with bank lending drying up and equity markets not conducive, India’s second-largest airline by market share is relying on money released ahead of the payments cycle by these consolidators to meet its expenses. The consolidators usually make payment every 15 or 21 days. About eight months ago, the report said, Kingfisher had requested the consolidators to pay for tickets at the beginning of the month itself, instead of in cycles. In return, the airline had agreed to pay 3% interest every month to the consolidators. It was supposed to be a perfect and cosy, though unusual, arrangement. The strapped airline gets the money, while the consolidators get interest but the move has created unhappiness among its rivals.It said the airline has upset rivals who blame the practice for the losses they suffer through discounted tickets. “If an airline goes to the travel agent and gives 36% interest in a year against ticket money, it becomes unviable to compete with it,” a top official of another airline, who did not want to be identified, told Economic Times.Since they have already paid Kingfisher, the consolidators are forced to dispose of the tickets at any cost. This forces other airlines to drop fares, the paper said. “If I am unable to sell Kingfisher inventory that is with me for the amount paid, I might stop selling other airlines like IndiGo and push for Kingfisher tickets,” a Kingfisher travel agent was quoted saying.According to him, a similar proposal was made to Air India last year. “Air India tried it for one cycle last year and abandoned the idea thereafter.”
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