Kingfisher Airlines, faced with mounting losses and starved of cash, said it had reduced operations but promised to return to full service within days.
The airline, controlled by liquor baron Vijay Mallya, cancelled 32 flights out of the 240 it operates each day, it said in a statement late on Saturday.
The disruption was due to "unexpected events" including bird strikes, which forced aircrafts out of service, the airline said.
India's airline companies, on course to lose $3 billion for the year ending in March, have struggled with low fares, high jet fuel prices and massive competition. Five out of six major carriers in India are loss-making.
Kingfisher, which on Thursday reported a loss of Rs 4.44 billion in the fiscal third quarter that ended in December, said its bank accounts had been frozen by the tax authorities over outstanding dues.
"However, this has happened in the past not just to us but also to Air India AIN.UL. We have resolved issues before and will do so again," the company said in the statement.
In December, tax officials froze 11 bank accounts of Kingfisher for failing to pay service taxes.
Bank accounts for the company were frozen for two days in November as well, but were subsequently opened up after the airline promised to pay the taxes.
Kingfisher has so far failed in efforts to attract fresh equity. Banks own about a quarter of its shares and State Bank of India, the lead bank, refuses to lend more without an equity injection.
But the airline said it was confident it would be able to raise new funds.
"We have had a good meeting with our consortium of banks who have accepted, in principle, the viability study prepared by SBI Capital markets and independent consultants," the statement said.
"Our request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals."
The government is expected to soon allow foreign carriers to take a 49 per cent stake in local airlines, a move Kingfisher has long called for, which may prove to be the saviour of the debt-laden industry.