Embattled Kingfisher Airlines on Thursday won more time from lenders to develop a turnaround plan while its bankers moved ahead with the sale of two properties to recover a small fraction of what they are owed.

Kingfisher, controlled by liquor baron Vijay Mallya, has never made a profit in a struggling Indian airline industry and has seen its domestic market share fall from second to last among the six big carriers after grounding most of its fleet.

"They will have to come up with concrete steps to improve operations in 15 days, otherwise we will have to take some other actions," said an executive with State Bank of India, which heads a consortium that met the airline on Thursday.

The banker declined to be named or give specifics.

Kingfisher, named after Mallya's flagship beer brand, had debt of $1.4 billion at the end of March, and most of its banks, which are mostly state-run, declared its loans to be in default during the December quarter.

ICICI Bank said it unloaded its Kingfisher debt to a fund managed by SREI Infrastructure Finance.

Earlier lenders to the carrier, worried it will fall short in its efforts to find a big investor, said they were considering ways to recover their money including invoking securities and guarantees against their loans.

Another banker at Thursday's meeting, which Mallya did not attend, said little was decided.

"They made a presentation; they need fund infusion. We told them again they need to get equity up-front. We are giving them more time but we can't give them more money," the banker said, also declining to be identified.

Known as the 'King of Good Times' for his opulent lifestyle, Mallya owns a Formula One racing team as well as a cricket team and is a member of India's upper house of parliament.

Shares in Kingfisher pared early gains to close 0.42 per cent higher on Thursday, in line with the market. They are down 82 per cent since the start of 2011, giving it a market value of $147 million.

WARNINGS

The government warned Kingfisher in March that its licence to fly could be cancelled if it fails to adhere to safety norms, which include financial viability.

Kingfisher has been hoping the government follows through on a proposal to allow foreign carriers to own up to 49 per cent of Indian airlines, but the plan has been stalled for months.

Kapil Kaul, regional head of the Centre for Asia Pacific Aviation, said Kingfisher needs an immediate equity injection of $500 million.

Kingfisher has scaled back its fleet to 16 planes from 64, stopped flying overseas, and has not paid staff since January.

"Lenders may need an informal political go-ahead to initiate recovery and that stage has not reached. Otherwise, process of recovery would have begun much earlier," Kaul said.

As of the end of March, Kingfisher's controlling shareholders had pledged 90.11 per cent of their holding in the airline with lenders, while controlling shareholders of another UB group company, United Spirits, had pledged 94.42 per cent of their stake, according to Bombay Stock Exchange data.

"The caution/patience exercised by the lenders is largely because it will have serious consequences for all UB group firms," said Kaul.

SALE OF PROPERTIES

Banks expect to recover about $25 million from the sale of Kingfisher properties in Mumbai and Goa, the SBI executive said.

Kingfisher said last year its loan repayment plan included selling its Mumbai property, Kingfisher House, at an estimated 900 million rupees.

"We told them you have to put these on the block and they have agreed," the SBI executive said, referring to the Mumbai and Goa properties.

In a statement after the meeting, Kingfisher said: "The meeting was scheduled as an update meeting and there was no discussion on commencement of recovery proceedings."

Sharan Lillaney, aviation analyst at Angel Broking, said the move will help Kingfisher reduce its interest burden.

"Maybe if FDI (foreign direct investment) gets approved, and interest rates come down and the debt situation becomes manageable, they can still run the company," he said. "It's an unlikely scenario, but it is still possible."