Once India's largest private airline, Jet halted all flight operations indefinitely on Wednesday evening after lenders led by State Bank of India declined to extend more funds to keep the carrier going.
Investors punished Jet shares on Thursday, driving them down 34 percent in their biggest intraday fall. The company is worth about $260 million (£200 million) now, versus $1.6 billion at its peak in 2005.
The carrier, saddled with roughly $1.2 billion of bank debt, has been teetering for weeks after failing to receive a stop-gap loan of about $217 million from its lenders, as part of a rescue deal agreed in late March.
While lenders are "reasonably hopeful" a bidding process for an up to 75 percent stake in the airline will end successfully, analysts are much more sceptical.
"I think the bidding process is going to fall apart," said HDFC Securities analyst Madhukar Ladha. "Slots are being given away rapidly, dues are to be repaid to lessors, lenders, staff, and everyday it is not operating, the liability adds up. In the end when you're sitting across the table with a potential buyer, the buyer doesn't know what he is buying."
At its peak, Jet operated over 120 planes and well over 600 daily flights. The airline, which has roughly 16,000 employees, has in recent weeks been forced to cancel hundreds of flights and to halt all flights out of India as funds dried up.
"The best way forward for the survival of Jet Airways is to get the binding bids from potential investors," Jet's lenders said on Thursday, adding they are "reasonably hopeful" the bid process will be successful.
Private equity firms TPG Capital and Indigo Partners, Indian wealth fund National Investment and Infrastructure Fund (NIIF), and Etihad Airways, which already owns a minority stake in Jet, are in the running, said a source involved in the process.
However, the crisis at Jet, long the biggest operator in Mumbai, has opened a window of opportunity for rivals.
Jet's slots are being allocated to other airlines based on factors like fleet and staff strength, a civil aviation ministry source said on condition of anonymity.
Once allotted, an airline can keep the slot for one flying season or six months and Jet can reclaim the slots if it is revived by the end of the flying season, the source said.
The current flying season ends on Oct. 26, according to the Indian aviation regulator's website.
"We are assisting airlines and airports to bring in capacity rapidly to ensure that fares remain stable," India's Ministry of Aviation said on Twitter on Wednesday, adding it was set to meet airport authorities and airlines to assess matters on Thursday.
A gap in capacity has pushed up fares by 30-40 percent since September in India, ratings agency ICRA has said.
India's biggest airline IndiGo has been rapidly inducting new Airbus SE A320neos into its fleet in recent months.
Low-cost airline SpiceJet pledged to add 27 planes over the next two weeks, adding it would launch 24 new flights from Mumbai and Delhi.
"The industry is currently facing severe shortage of capacity and SpiceJet remains committed to make all possible efforts to minimize passenger inconvenience," said Ajay Singh, SpiceJet's chairman.
SpiceJet shares closed 2.7 percent higher on Thursday, while shares in IndiGo's parent InterGlobe closed down 1.7 percent. Jet shares ended the day down 31.5 percent.
Some 200 employees gathered at the airline's headquarters in Mumbai to push its management for answers about their future. At the same time, about 800 Jet employees and their families held a march near Parliament House in New Delhi, many carried placards, and some were in tears, blaming the government for failing to do anything to rescue the airline.
"I travel from New Delhi to Kolkata just to vote, that vote should carry some value, isn't it? If you treat us like this why should we vote?" asked Sushma Pradhan, a cabin crew member, who took part in the protest in New Delhi.
A Jet collapse would be a big blow to Indian Prime Minister Narendra Modi, who is currently seeking re-election in a weeks' long general election. Modi's critics blame his government for rising unemployment.
India's opposition Congress party also criticised Modi's government over Jet's downfall.
"The very fact that Jet Airways has collapsed is basically a manifestation of the failed economy," said Congress spokesman Sanjay Jha, noting that Jet's collapse had come despite a stable global economic situation, and muted oil prices.
The ruling BJP however, blamed Jet's issues on mismanagement of the company, not mismanagement of the government.
The "government cannot bailout private companies with public money ... We will resolve this problem in a systematic manner," said Gopal Krishna Agarwal, BJP's economic affairs spokesman.
Lenders wanted to keep Jet operating but refused to extend a stop-gap loan to the carrier partly due to concerns over whether there had been any regulatory violations, a source at one of the banks said on condition of anonymity.
"If in the future someone finds some rules were violated, then it could get us all in trouble," the source said. "You don't know how these things work out."
(Reporting by Tanvi Mehta and Adnan Abidi; Additional reporting by Nivedita Bhattacharjee, Abhirup Roy, Arnab Paul, Aftab Ahmed, Krishna V. Kurup and Jamie Freed; Writing by Jamie Freed and Euan Rocha; Editing by Himani Sarkar/David Evans)
By Tanvi Mehta and Adnan Abidi