Tax authorities have frozen its bank accounts. Most of its fleet is grounded. Staff haven't been paid since December, and India's aviation minister has threatened to shut it down if it can't meet safety and financial viability standards.

The airline needs a white knight investor - urgently - if it is to survive in its current form.

" Kingfisher's survival depends on the equity infusion. Everything depends on that. If he can't get that then everything will fall apart," said an executive at a state bank that considers its loan to Kingfisher non-performing, a classification Indian lenders make reluctantly. The executive did not want to be named as he is not authorised to comment on individual client issues.

While Mallya shoulders plenty of blame for Kingfisher's crisis, a harsh regulatory environment and taxes that make jet fuel more expensive than just about anywhere else also hurt.

The demise of Kingfisher would benefit rivals such as top-two carriers Jet Airways (JET.NS) and IndiGo, and fares have indeed risen since Kingfisher started grounding its planes.

However, India's aviation market dynamics will remain brutal in the absence of major policy changes and as long as New Delhi subsidises even bigger losses at state-owned Air India .

Kingfisher's banks, owed $1.3 billion, would be left to pick over the carcass in a country that does not have a formal bankruptcy process. Loans are secured in part by a combination of guarantees by the airline's parent, the UB group, as well as Kingfisher shares, Mallya's personal guarantees, Mumbai real estate assets and the Kingfisher brand itself, bankers said.

European planemaker Airbus (EAD.PA), which has accommodated Kingfisher by pushing its aircraft deliveries back in the queue, would lose outstanding orders for 92 planes with a combined list price of $12 billion. It would also see Kingfisher's fleet enter the second-hand market.

"We have supported them in good times and we are supporting them in bad times," said Airbus spokesman Justin Dubon.

Kingfisher shares, worth about $190 million, skidded to a record low this week on mounting fears of the airline's demise.

Mallya on Tuesday submitted what he described as a "holding" plan with regulators to fly an abbreviated schedule with just 20 planes - less than a third of its former strength - and cancelled all international flights.

DEATH SPIRAL?

Kingfisher's compounding woes bring it closer to the point of no return.

"When you get into a quagmire, and have three or four big issues and are trying to solve all together and none are getting resolved, it's just like a quicksand pit that keeps dragging you down," said a former member of Kingfisher's board of directors, who did not want to be named due to the sensitivity of the matter.

With little cash, Kingfisher is cancelling flights. Cancelled flights mean passengers choose other airlines. Fewer passengers mean even less cash to keep planes in the air, making it that much harder to attract investors. Once India's No.2 airline, it now has less than 10 percent of the domestic market.

Mohammed Zafar, a manager at Akbar Travels of India, said he stopped selling Kingfisher tickets after the International Air Transport Association (IATA) suspended the airline from its clearing house for failure to pay its dues.

"With each passing day, the number of flights become fewer. How can we issue tickets if we are not sure about the airline?" Zafar said in New Delhi.

While Mallya has his detractors, he is working strenuously to pull his airline back from the brink.

"It's just the solutions never came ... attempts were made, but no solutions. The hope of promise from A party or B government or C guy never came," said the former Kingfisher director.

Despite his bluster - Mallya boasts that he personally selects the carrier's flight attendants - Kingfisher had won plaudits for its "five-star" service and being the first Indian airline to offer video screens for every seat.

Kapil Kaul, South Asia CEO of the Centre for Asia Pacific Aviation, said the only thing keeping Kingfisher aloft now is Mallya himself, who with his associate companies has injected roughly $200 million over the past fiscal year, he reckons.

Kingfisher could not immediately be reached to confirm that.

Others are less charitable.

"Mallya is busy in cricket and racing and beer. Where does he have the time to run an airline?" said an executive with another state bank, which faces losses on its Kingfisher loan. The executive was also not authorised to comment publicly on individual clients.

HALF A BILLION, GIVE OR TAKE

Kingfisher needs an immediate $500-$600 million, half brought in by Mallya and half by his bankers, said Kaul.

"Every passing day the risk profile increases ... I would think that, the next two to three weeks, the money has to come in," he said.

Where that money comes from is the question. A few names, including Hong Kong distressed investor SC Lowy, have came up, but nothing has materialised despite the airline's assurances that talks with potential investors are ongoing.

Any investor would be taking a punt on an airline that has never been profitable and is not the only troubled operator in a country where five of the six big airlines lose money.

While the airline has value to Mallya as a branding tool for his flagship Kingfisher beer, that isn't necessarily worth much to an outside investor.

Mallya, who with his cricket and Formula One racing teams and flashy lifestyle bills himself as the "King of Good Times", has failed in numerous bids to bring in fresh equity. His options are hobbled by a 49 percent cap on foreign investment.

A member of parliament, Mallya has also been pushing the government to allow foreign airlines to own up to 49 percent of local carriers, a move it is considering and expected to make when it has built a political consensus.

Even if allowed, few airlines would covet a stake in Kingfisher given an Indian airline market on track to lose about $2.5 billion in the current fiscal year, according to CAPA.

CLOUT HAS ITS LIMITS

Mallya is friends with some of India's top politicians and has clout, which may have helped the airline sputter on for as long as it has. Kingfisher's bank consortium consists mainly of state lenders led by State Bank of India (SBI.NS).

However, the patience of India's regulators has been running thin since Kingfisher began slashing flight schedules late last year, disrupting the travel plans of thousands. Meanwhile, the government has an in-built conflict of interest as both the airline's regulator and owner of ailing rival, Air India.

"Vijay Mallya has to convince DGCA (directorate general of civil aviation) that he is in a position to operate an airline ... The onus is on him," Aviation Minister Ajit Singh said on Tuesday.

In one glimmer of good news, Mallya said on Tuesday that the authorities had unfrozen some of the airline's bank accounts in the southern city of Bangalore, where it is based, but gave no details.

One potential outcome is that Mallya throws in the towel, possibly to revive the carrier on a smaller scale.

"It needs to restart from scratch. Say we only have X-number of planes and these are the only routes we fly," said the ex-director, who believes a white knight investor will emerge.

But Sharan Lillaney, aviation analyst at Angel Broking in Mumbai, said an equity injection looks unlikely.

"The company has a mountain of debt and has a huge liability towards employees, oil companies and leasing companies. So I think, more or less, the company's time is up."

(Additional reporting by Henry Foy and Swati Pandey in MUMBAI, Anurag Kotoky and Satarupa Bhattacharjya in NEW DELHI and Tim Hepher in PARIS; Editing by John Chalmers and Ian Geoghegan)

• A Permanent Economic Emergency