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Miles bought from Kingfisher: Banks have nowhere to fly

Last updated on: March 13, 2012 09:04 IST

The 'King of Good Times' is giving its partner banks a hard time.

Banks that have partnered Kingfisher Airlines to offer air miles as rewards to credit card customers are stuck with the inventory purchased from the private carrier, as it has reduced its flight services and suspended operations on some routes.

Typically, banks buy air miles three-six months in advance from airline companies at a discount to the market price.

The lenders offer these miles as rewards to their clients for credit card spends.

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Miles bought from Kingfisher: Banks have nowhere to fly

Last updated on: March 13, 2012 09:04 IST

These contracts do not have a buy-back clause that would allow banks to return the miles and recover money from the airline.

Several banks, including State Bank of India, ICICI Bank, HDFC Bank and Axis Bank, have partnered Kingfisher Airlines for their credit card reward programmes.

"We are not buying fresh miles from Kingfisher, since we already have that in our inventory and there are no takers.

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Miles bought from Kingfisher: Banks have nowhere to fly

Last updated on: March 13, 2012 09:04 IST

"We may have to incur a loss as there is no buy-back clause but it will have no significant impact on our overall operations," said a senior official of a large private sector bank.

The official said the bank was willing to offer alternative rewards to its clients, who have received Kingfisher miles but not used them yet.

Besides partnering for air miles, a few lenders like American Express and ICICI Bank also have co-branded credit cards with Kingfisher Airlines.

Bankers said they were no longer marketing these cards on their own.

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Miles bought from Kingfisher: Banks have nowhere to fly

Last updated on: March 13, 2012 09:04 IST

"If a customer wants a Kingfisher card, only then are we offering the card," said a banker familiar with the developments.

The cash-strapped Kingfisher Airlines, which reported a loss of Rs 1,027 crore (Rs 10.27 billion) in 2010-11 and Rs 1,175 crore (Rs 11.75 billion) in the first nine months of this financial year, is believed to have accumulated losses of around Rs 6,000 crore (Rs 60 billion).

The airline has opted to restructure its debts for the second time and is finding it difficult to pay staff salaries on time.

Will the FM raise tax exemption limits? Will he manage to keep both industrialists and common people happy? To know all about Union Budget 2012-13, Click here!
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