Kingfisher has organised funds to pay salaries: Vijay Mallya

India's Kingfisher Airlines has organised funds to pay overdue salaries, Chairman Vijay Mallya told staff in an email, offering assurances that he would reward employees who stay committed to debt-crippled carrier.

Separately, Mallya told the Times newspaper in London that  Kingfisher was in talks with two unidentified foreign carriers about equity tie-up that could be announced within days.

International Airlines Group, the owner of British Airways and Iberia, and Abu Dhabi's Etihad Airways have been involved in talks for investment in the Indian carrier, the newspaper said, citing unnamed sources.       

IAG characterised the Times report as speculation.       

"The process to allow foreign airlines to invest in Indian carriers has not yet been fully approved so it would be wrong to speculate about IAG's interest in any Indian airlines at this stage," IAG said in a statement on Monday.       

A government panel has recommended that foreign airlines be allowed to buy up to 49% of Indian airlines.       

A spokesman for Kingfisher did not respond to an email seeking comment on the Times report.      

Kingfisher, which has severely cut back on flights and operating aircraft, has not paid salaries to many of its staff for months, setting off an exodus to rivals.       

The airline, which has a debt of about $1.3 billion, needs at least $400 million soon to keep flying, according to the Centre for Asia Pacific Aviation, an industry consultancy.       

Mallya's plans to raise funds through a share sale have been delayed and he has been lobbying the government to pressure state-run banks to lend more.       

"I have organised funding so that we can pay your seriously overdue salaries which is a source of great personal sorrow for me," Mallya said in an email sent to staff on Sunday, a copy of which was obtained by Reuters. He did not elaborate.       

Mallya asked staff to remain loyal to Kingfisher, whose market share has almost halved from more than 20% over the past few months.       

"We may not be the biggest now but we remain simply the best for our guests," he wrote, adding that loyalty would be rewarded.

Kingfisher's bank accounts were frozen by tax authorities more than a week ago because of unpaid taxes. Mallya said he hoped to see some resolution to that issue by early next week.      

The UB group, which controls Kingfisher, and associate companies converted their loans to the carrier to an additional five percent equity last week. This "clearly demonstrates the faith that I have in all of you and in our company," Mallya said.

Kingfisher will be able to save about 15 percent in fuel costs after the government recently allowed airlines to directly import fuel, Mallya said. Importing fuel directly allows airlines to avoid some state taxes.

Kingfisher shares closed 1.9% lower at 23.75 rupees. The overall market dropped 2.67%.

(Reporting by Sanjeev Choudhary; Additional reporting by Rhys Jones in London)