Barely a year ago, privately owned Kingfisher Airlines was the second-largest carrier in India. Today, its entire fleet is grounded and it is close to losing its air operator certificate.

Labor unrest over unpaid salaries forced a shutdown of Kingfisher’s daily operations from Oct. 1, and talks between the airline’s management, headed by owner Vijay Mallya, and striking engineers and pilots continue without resolution.

“We will have to look at extending the lockout for a few more days . . . The meeting with the representatives of pilots and engineers was very good. The discussions are moving in the right direction . . . But we will be meeting again shortly,” says airline CEO Sanjay Agarwal Oct. 17.

The debt-ridden airline offered to pay one month’s salary immediately and expedite payment of the remaining six months as soon as the company is recapitalized, but the labor groups rejected the offer.

“Our strike will continue, as the management has failed to give any commitment on payment of our salary,” says Vikrant Patkar, a pilot who his represents engineers as well as his own work group.

Nearly 300 pilots have stayed away from work since Oct. 1, protesting the non-payment of salaries from March 1.

“There is no money, and they also can’t give any commitment as well . . . We are not going to work unless we are paid for the last seven months. So we have rejected their offer,” Pathak says.

Indian Civil Aviation Minister Ajit Singh says he may revoke the airline’s operator certificate. Under the rules set by the regulator Director General of Civil Aviation (DGCA), an airline must operate at least five aircraft to retain its status as a scheduled carrier. Kingfisher was operating about 10 aircraft of a fleet that numbered 64 before the shutdown.

The airline “will not be allowed” to fly until the engineers “approve and certify the airworthiness of the aircraft,” the minister says.“Passenger safety cannot be compromised. If there is a safety issue with Kingfisher, we will close it down,” he adds.

According to the rules of the DGCA, flights are not allowed to operate unless declared fit to fly by engineers. The DGCA says it is “very concerned about the situation” and “ready to talk” to Kingfisher employees if they are not satisfied with the airline’s plan.

The airline, however, has said it would resume operations Oct. 20.

The date is significant since it is also the deadline for the airline to prove to the DGCA that it has a viable operational plan to support the continued grant of its air operator certificate.

The DGCA on Oct. 5 issued a show-cause order to Kingfisher, “asking why its permit should not be canceled or suspended, as the airline has failed to establish a safe, efficient and reliable service.” It also rejected the airline’s proposed winter schedule. The DGCA on Oct. 17 approved the 2012 winter time tables of scheduled domestic airlines, effective from Oct. 28. In all, 10,935 departures per week, or 1,562 a day, have been approved. “But we have not given approval for Kingfisher Airlines,” a DGCA official says.

Kingfisher operated 2,930 departures in winter 2011.

The airline has been looking for investors outside the country after the Indian government recently allowed international airlines to own up to 49% equity in local carriers.

Kingfisher, which used to operate about 400 flights a day, has not made a profit since it launched operations in 2005.

While the airline says it is in talks with global airlines for a potential investment, no carrier has publicly expressed interest. The company also been holding talks with a consortium of banks on restructuring its massive debt.

Several of its aircraft have been taken away by lessors or grounded by the Airports Authority of India for non-payment of dues during the past few months.

Kingfisher has been in the red due to high fuel prices, interest costs, bleeding international operations, competition from low-fare carriers and large debts.

Meanwhile, a city court in Hyderabad on Oct. 12 issued a non-bailable warrant against owner Mallya and five others for bounced checks.

The warrant was issued after a charge was filed in August by GMR Hyderabad International Airport Ltd. (GHIAL), which manages Rajiv Gandhi International Airport in the city. GHIAL claims four checks totaling 103 million rupees ($1.8 million) issued by Kingfisher toward airport user charges, including parking, landing and navigation fees, were rejected by the bank for lack of funds.

A320 photo: Kingfisher