Lenders to Jet Airways have said they plan to bring insolvency proceedings against the struggling carrier.
The move follows a failed attempt to find a suitable buyer for what was once India’s biggest private airline.
Jet Airways has been hampered by more than $1bn (£790m) of debt.
In April, the airline suspended all international flights. The move left passengers stranded in India and European cities including London, Paris and Amsterdam.
Etihad Airways already owns 24% of Jet Airways and is reported to have expressed an interest in taking more control.
Banks have been seeking a buyer for the airline, but the latest development by the carrier’s lenders suggest there are no serious bidders available.
The insolvency process, if successful, will allow lenders such as State Bank of India to begin selling parts of the business, or assets, in order to recover some of the money they are owed. A court will decide what happens next.
Pilots, engineers and ground staff have not been paid for months, and passengers have been left stranded around the world as a result of cancellations.
Jet Airways was formed in 1993 after India liberalised its economy and allowed competition from private carriers.
The rise of Jet Airways coincided with the decline of Air India, which was plagued by poor service and bad business decisions.
By Sameer Hashmi, India Business Reporter
After a prolonged struggle to revive the ailing airline, the lenders have run out of patience.
Their decision to refer Jet Airways for insolvency is the final nail in its coffin.
With liabilities of more than $4bn, the airline failed to attract any serious investors.
Technically, it could still be sold to a new investor under the bankruptcy proceedings. However, given the size of its overall debt and liabilities, experts feel it’s very unlikely to find any suitors.
The bankruptcy proceeding will take time to complete, but the closure of Jet Airways marks a significant chapter in India’s aviation history.
During the course of its life it went on to become one of the most successful private carriers in the country. During its peak, Jet Airways used to operate on 600 domestic and 380 international routes with more 110 aircraft as part of its fleet.