Hopes for Jet Airways are fading as its shares plunge and rivals rush to fill the supply gap.
The airline, once India’s largest private carrier, cancelled all flights indefinitely on Wednesday after lenders led by the State Bank of India refused to extend funding.
On Thursday, the carrier’s shares fell 26.9%, leaving it valued at around $260m (£199m) – far from its 2005 peak of $1.6bn (£1.2bn).
Jet Airways and its lenders had been trying for weeks trying to find a solution to the airline’s £900m debt problem.
But on Wednesday Jet announced that, with no emergency funds forthcoming from the lenders or any other source, it could no longer pay for the fuel and services required to continue operations.
Lenders said they were “reasonably hopeful” that a bidding process for up to 75% of the company would result in a solution.
In a statement on Thursday, they said: “The lenders after due deliberations decided that the best way forward for the survival of Jet Airways is to get the binding bids from potential investors who have expressed EOI (expressions of interest) and have been issued bid documents on 16 April.”
It was reported by Mumbai-based CNBC-TV18 that those investors are private equity firms TPG Capital and Indigo Partners, Indian wealth fund National Investment and Infrastructure Fund (NIIF), and UAE-based Etihad Airways, which already owns a 24% stake.
“Lenders are reasonably hopeful that the bid process is likely to be successful in determining fair value of the enterprise in a transparent manner,” the statement concluded.
This bidding process is due to conclude on 10 May.
But commentators such as Shukor Yusof, the head of aviation consultancy Endau Analytics, were doubtful that this would be soon enough.
He said the company’s value was “dwindling with each passing day” and rivals are preparing to step in.
SpiceJet has promised an extra 27 planes will be added to its fleet over the next fortnight and India’s biggest airline IndiGo is also rapidly expanding.
Edelweiss Securities analyst Vijayant Gupta added: “Rivals are looting available slots because of Jet’s shutdown.”
SpiceJet shares were at their highest since February last year, up as much as 15%, while shares in IndiGo’s parent company InterGlobe Aviation were up 3%.
Meanwhile, there are concerns for the future of Jet’s 20,000 staff, some of whom have not been paid for up to three months.
In a note to employees reported in the Times of India, Jet Airways chief executive Vinay Dube said: “We don’t have an answer today to the very important question of what happens to employees during the sale process.”