Jet Airways Ltd shares plunged on Thursday, battered by fears about whether the grounded Indian airline would fly again, even as carriers like rival SpiceJet rushed in to plug a supply gap in the wake of their rival's demise.

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 per cent in their biggest intraday fall. The company is worth about $260 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 per cent stake in the airline will end successfully, analysts are much more skeptical.

"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 per cent 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.