The licence of the airline, whose fleet has been grounded for days due to a strike over unpaid salaries, has been suspended until it presents a "viable" revival plan, said R.K. Khanna, the deputy director general of civil aviation.
Kingfisher, which has billions of dollars in debts, has not paid staff for seven months and is desperately seeking a foreign buyer to save it from complete collapse.
Relations between the Kingfisher management and its staff reached a boiling point last month after the company declined to commit when it would settle its dues, prompting employees to boycott work.
"The stage had come when the airline neither had engineers nor pilots at work. There was nobody to certify or actually fly the planes," Khanna told AFP.
"Kingfisher's (flying) permit has been suspended... till they show us a viable revival plan and are able to prove to us that it is a safe, efficient and reliable service," he said.
Much of the criticism for the airline's decline has been directed at Vijay Mallya, the cigar-puffing billionaire who owns the company, and his flamboyant lifestyle.
But while the tycoon's empire -- spanning beer, whiskey, a cricket team and fertilisers -- is not seen to be under threat, recent moves suggest he too is facing a financial crunch.
His flagship United Breweries, India's biggest brewer, is in talks to sell a stake of the profitable liquor empire to Diageo, the world's largest distiller, which analysts say could raise $800 million.
The 56-year-old is also desperate for a foreign airline to pump fresh capital into Kingfisher after India relaxed its investment policies last month.
But analysts are doubtful anyone will come forward to rescue a company drowning in a debt pile estimated at $2.49 billion by the Center for Asia Pacific Aviation, an airline industry research group.
Sharan Lillaney, an aviation analyst at Mumbai's Angel Broking, said it was unlikely the airline would be able to bounce back from the crisis any time soon.
"This (suspension) is just a formality as they were not flying anyway. Without equity infusion, it is next to impossible for the airline to come back and fly," Lillaney told AFP.
A pilot with the airline said the situation surrounding the company was "one big farce".
"Employees are being blamed for the crisis, which is a shame. Did we bring the airline to this situation?" he told AFP, declining to be named.
He said the striking staff -- which includes pilots and engineers -- would continue to agitate to recover their long-overdue salaries.
The company was India's second-largest airline until a year ago but now it has a market share of just 3.5 percent, the smallest of the country's carriers.
The airline has drastically reduced its operations in the past year, shutting down international flights completely.
Saturday's suspension implies an immediate halt to all travel bookings on the entire Kingfisher network.
A Kingfisher spokesman said the company would comment after assessing the latest development.
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@usman786: High cost structure. BAd business strategy. Good customer service mad eit popular but due to other 2 reasons it was not proftable. A decade back another airline went down the same path.- Damania. IT too had the best customer service at that time but could not make its path to profitability.
Why the down fall occured? Detail
kingfisher has some of the most prettiest air hostesses in the world....some r even kingfisher calendar model girl...plz allow it to run..................
I liked flying kingfisher. Too bad it shut down
All the striking employees will be paid equivalent amount of kingfisher beer in lieu of money owned to them by the airline..so they can drown in their sorrow.