Buffeted by heavy debt burden and steep increase in fuel cost, Kingfisher Airlines seems to have landed in financial quicksand. The flight cancellation imbroglio last week is the latest in the series of bad news faced by the company, and reflects the make-or-break situation it finds itself in.

Over the last few months, the airlines' auditors have questioned its ability to survive without additional funds, analysts have labelled it bankrupt, and the company's move to exit the low-fare segment has found few takers. Kingfisher Airlines has been struggling for a long time now and has continuously been in losses since inception in 2005. This is primarily due to the huge debt on its books, which prevented it from posting profits even during the better days of 2010 when crude oil prices were benign.

The company's debt recast early this calendar, which saw lenders pick 23 per cent stake, had raised hopes about Kingfisher's prospects. However, the sharp rise in the price of crude oil to above $100 a barrel queered the pitch. Also, capacity increases and irrational pricing in the sector prevented fare rise to sustainable levels, and have amplified the company's losses. Kingfisher may be in urgent need of a lifeline now, but it remains to be seen whether lenders, who have seen the value of their stake erode sharply, oblige.

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