“Jet Airways is compelled to cancel all its international and domestic flights. The last flight will operate today,” it said in statement.
Jet had asked a consortium of lenders led by the State Bank of India to urgently provide four billion rupees ($57.5 million) but said that this had not been forthcoming.
“This has been a very difficult decision but without interim funding, the airline is simply unable to conduct flight operations in a manner that delivers to the very reasonable expectations of its guests, employees, partners and service providers,” it added.
The airline was once India’s second-biggest by market share but is on the brink of collapse with debts of more than $1 billion.
Jet was operating just five planes on Wednesday because it could not pay its bills, down from a fleet of more than 120 at its peak.
The carrier has cancelled hundreds of flights in recent weeks, stranding thousands of passengers.
It has repeatedly defaulted on loans and failed to pay staff in recent months.
The consortium took control of Jet in March, pledging to give $218 million in “immediate funding support” as part of a debt resolution plan.
But they have failed to release most of the money and the banks also failed to agree how to proceed after a meeting of several hours on Monday.
The SBI-led consortium is looking for a buyer for Jet and a deadline passed on Friday for prospective bidders to express an interest in acquiring a 75 percent stake in the carrier.
The SBI is yet to announce a shortlist of prospective bidders but Indian media said four were in the running including Etihad Airways, which already owns a 24 percent stake.
“Jet Airways will now await the bid finalization process by SBI and the consortium of Indian Lenders,” the airline said, adding that it hoped to resume services “as soon as possible.”
A collapse of Jet, and the loss of more than 20,000 jobs, would deal a blow to Prime Minister Narendra Modi’s pro-business reputation as he seeks a second term in ongoing national elections.
Jet CEO Vinay Dube paid tribute to staff in an email to employees and said the airline “must be given another chance” to fly.
But analysts said buyers would be reluctant to buy a grounded airline that had lost most of its airport slots.
“Is someone willing to take the risk to give this comatose body an electric jolt? I don’t see it happening. At best it might come back in a smaller role,” said Devesh Agarwal, editor of Bangalore Aviation.
Bad investments, competition from several low-cost carriers, high oil prices and a weak rupee have led to Jet’s current financial predicament, experts say.
Analysts trace the start of Jet’s financial problems to its 2006 purchase of Air Sahara for $500 million in cash.
The Mumbai-based carrier quickly gained a reputation for introducing new initiatives — Jet was the first Indian airline to offer a frequent flyer program and in-flight entertainment.
But it began to take a battering from new, well-run budget airlines including IndiGo, GoAir and SpiceJet, which were founded between 2005 and 2006.
Alarm bells about Jet’s financial predicament started to ring loudly in August when it failed to report its quarterly earnings or pay staff, including pilots.
It later reported a loss of $85 million.