India’s Jet Airways grounded all flights on Wednesday after lenders refused to extend an emergency loan to the carrier.

Jet Airway’s new owners, a consortium of banks led by the State bank of India, are seeking a quick sale after taking control in late March in a debt-for-equity swap.

However, the airline – India’s second-biggest with a fleet of 120 aircraft – may struggle to get back into the air.

Jet Airways has been struggling for months and was forced to cancel all international flights, including to and from London, Paris and Amsterdam, last week.

The carrier owes more than $1.2 billion, has defaulted on debt payments and failed to pay aircraft leasing companies and crew.

The new owners immediately put the airline up for sale following last month’s deal, seeking an investor to acquire 75% of Jet after founder Naresh Goyal stepped down as chairman

But it was already too late to stop leasing companies impounding aircraft over the carrier’s unpaid bills.

India’s Economic Times reported an unnamed source at one of the banks saying the consortium had declined to make a further loan to the airline for fear about “whether there had been any regulatory violations”.

The source suggested: “If someone finds rules were violated, it could get us all in trouble.”

In a statement, Jet Airways said: “Without interim funding, the airline is unable to conduct flight operations.”

The airline described the suspension of flights as “temporary”. However, aviation analyst Shukor Yusof told the Economic Times: “[Jet’s] value is dwindling with each day.”

Another analyst reported: “Rivals are looting available slots because of Jet’s shutdown.”

India’s aviation ministry said: “We are assisting airlines and airports to bring in capacity rapidly.”

Shares in the carrier plunged on India’s stock exchange, with shares in the State Bank of India also falling.

However, the consortium of banks declared they remain “reasonably hopeful” of finding a buyer.

Media reports in India suggested the bidding process had attracted four possible investors including Etihad Airways, which already owns a 24% stake in Jet, and India’s National Investment and Infrastructure Fund.

The reports also identified US private equity firms TPG Capital and Indigo Partners, which pulled out of a deal to acquire Wow Air in March just before the Icelandic carrier failed.