The industry group's clearing house, ICH, settles accounts between the world's airlines, airline-associated companies and travel agencies.

"Kingfisher's participation in the ICH will be reinstated after the airline fulfils the ICH requirements," IATA spokesman Albert Tjoeng said in an email. Kingfisher can still partner with other airlines by settling with them directly, he said.

About 240 airlines, representing about 84 percent of global scheduled airline traffic, belong to the IATA.

Kingfisher said it could not settle the dues as its bank accounts have been deactivated by tax authorities, the same reason the company gave when it had to cancel most of its fights last month.

Of the 64 planes in its fleet, Kingfisher (KING.NS) is now using just 28, disrupting the travel plans of thousands of passengers across the country.

The company is in talks with tax authorities and expects its bank accounts to be reactivated shortly, the carrier said in a statement.

"Kingfisher Airlines continues to operate 200 flights to 46 domestic and international destinations. The ICH suspension does not impact our guests travelling on any Kingfisher Airlines flight or our flight schedules," the statement said.

Kingfisher, headed by liquor tycoon Vijay Mallya, has never made a profit since it was founded in 2005.

Adding to Kingfisher's troubles, CNBC-TV18 reported that Indian tax authorities had issued "show-cause" notices to the airline's top management, asking them to explain why the airline had not paid about 3 billion rupeesof tax.

Kingfisher has 10 days to respond, the TV channel said.

The airline, which has a debt of about $1.3 billion, needs at least $400 million soon to keep flying, according to the Centre for Asia Pacific Aviation, an industry consultancy.

Kingfisher's billionaire chairman Mallya, who owns one of the world's most expensive yachts and a cricket and Formula One team, is known as the "King of the Good Times" for a jet-set lifestyle.

Mallya is also chairman of United Breweries (Holdings) (UBHL.NS), a conglomerate with interests as diverse as aviation, breweries, biotechnology and real estate.

But Kingfisher, named after his famous brand of Indian beer, has become one of the main casualties of high fuel costs and a fierce price war between a handful of budget carriers which, between them, ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.

(Reporting by Anurag Kotoky; Editing by Ted Kerr and Will Waterman)

• A Permanent Economic Emergency