India's civil aviation regulator on Friday issued a notice to cash-strapped Kingfisher Airlines, which has grounded its fleet since Monday, asking why its licence should not be cancelled.
A crippling strike by employees who have not received salaries for seven months has forced the airline, which is teetering on the brink of financial collapse, to cancel all its flights for at least another week.
The debt-laden carrier has 15 days to respond to the notice, the regulator said, saying Kingfisher must be able to offer a "safe, efficient and reliable service" or face the possibility of losing its flying permit.
The notice from the Director General of Civil Aviation (DGCA) late on Friday has fuelled new doubts about the future of the airline, owned by billionaire liquor tycoon Vijay Mallya.
In the notice, DGCA chief Arun Mishra pulled up Kingfisher for not adhering to its flight schedule and "abruptly (cancelling) its flights time and again during the last 10 months", causing inconvenience to passengers.
Kingfisher spokesman Prakash Mirpuri said that the airline would send a "detailed response" to the regulator "well in time".
Mirpuri added the airline, which does not have funds to give workers seven months of back wages, would submit "a comprehensive plan for restoration of services after negotiations with our employees".
The carrier has been desperately scouting for a foreign airline to pump in fresh capital to keep it flying but analysts are doubtful any carrier will want to take an equity stake in the troubled company.
A new report by the Sydney-based Centre for Asia Pacific Aviation, a leading aviation consultancy, says Kingfisher's debts total $2.49 billion including bank debts of $1.1 billion, and it had accumulated losses of $1.9 billion.
The company was India's second-largest airline until a year ago but now it has a market share of just 3.2 percent, the smallest of the country's carriers.
The airline has drastically reduced its operations in the past year, shutting down international flights completely.
On Friday, nearly 200 striking pilots, engineers and other workers staged a march in Mumbai in protest after the wife of a Kingfisher technician killed herself in the Indian capital.
Police said the woman had left a note blaming her death on financial stress as her husband had not been paid for several months.
Kingfisher's shares fell by 4.68 percent to 13.25 rupees, marking the airline's fifth day of trading declines.
Mallya is in talks to sell part of his profitable liquor empire United Spirits to Diageo, the world's largest distiller which has long eyed a bigger presence in India, the biggest whisky market globally.
The talks have spurred hopes Mallya could raise capital for the airline, named after his popular beer brand -- his flagship United Breweries (UB) is India's biggest brewer -- and help restore Kingfisher's finances.
Banks, which own around a quarter of the airline after converting debt into equity and would take a large hit if it collapses, have been demanding Mallya come up with more capital before giving the carrier any fresh funds.