In the airline's annual report (2012-13), he also mentions that the company is in talks with a "potential investor".
United Breweries (Holdings) Ltd, the holding company of the airline, has filed a case against International Aero Engines AG in a Bangalore Court, claiming Rs 1,677 crore in damages, for allegedly supplying inherently defective engines, said the report.
The report, signed by Mallya, has been sent to shareholders ahead of Annual General Meeting on September 24.
"In view of the difficult operating environment as well as the engine problems, your company's airline operations and finances were severely affected," the annual report said.
Coupled with coercive action by the tax authorities, who attached the carrier's accounts as well as the sources of revenue, Kingfisher Airlines defaulted on payments to creditors and delayed salary payments, it said.
According to the annual report, the absence from work (strike) by the carrier's employees periodically, made it impossible for the airline to maintain its schedule integrity, thereby leading to stopping of operation.
company is in talks with a potential investor
The revival plan has also been shared with the lenders of Kingfisher Airlines, who, however, have been generally unsupportive of the company's efforts to revive the airline causing further hardship, the report said.
According to the annual report, phase 1 of the recovery plan involved restarting operations with a limited fleet of seven aircraft (five Airbus and two ATR planes), gradually raising to 21 aircraft (10 Airbus and 11 ATRs) in 3-4 months.
UB Group has offered to organise funding of about Rs 650 crore to implement this phase, it said.
The second phase (full recapitalisation) envisages bringing a new investor with fresh capital, the report said. It will address debt restructuring, servicing and repayment.
"Nevertheless, your company diligently continues its efforts to bring in fresh infusion of funds and discussions with various prospective investors are under way, despite the persistent negative media statements being made by the lenders as well as the hostile recovery action initiated by the lenders proving to be a major concern for these investors," it said.
The company remains in dialogue with several investors and believes that there is a rationale for investment for various strategic and non-strategic investors, the annual report said.
"As on the date of this report (August 14), your company is engaged in discussions with one such potential investor," it added.