Jet Airways is shutting down operations from tonight

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Separately, two sources at state-run banks told Reuters on Wednesday that the banks had rejected the 4 billion rupees ($58 million) that Jet had sought to keep itself temporarily afloat, while its lenders attempted to identify an investor willing to acquire a majority stake in the airline and attempt to turn it around.

Jet Airways, in its letter said SBI had earlier in the day rejected an offer for interim funding of Rs 983 crores and were compelled to cancel all global and domestic flights.

The airline took the decision in the wake of lenders refusing to offer a lifeline.

Lohani, who is helming state-owned Air India for the second time, also said the issue has no easy solutions, yet a solution would need to be found.

Stewardesses from Jet Airways (L) and Etihad Airways listen to a news conference by Naresh Goyal, chairman of Jet Airways and James Hogan, chief executive of Abu Dhabi's Etihad Airways, (both not seen) during a news conference in New Delhi July 23, 2014. 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 have dried up.

The airline said it has informed the Directorate General of Civil Aviation and the Ministries of Civil Aviation and Finance and other government institutions about its decision.

Jet Airways had requested its lenders for aditional Rs 400 crore but it was rejected. While the news are yet to be made official, Indian media already reports four companies have been shortlisted: Indigo Partners, National Infrastructure and Investment Fund (NIIF), TPG Capital, Indigo Partners, and Etihad Airways, which now holds 12% stake in the airline.

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"Jet Airways is hopeful that it will be able to bring the joy of flying back to its guests as soon as possible", the airline said.

Jet's failure would also be a blow to Indian Prime Minister Narendra Modi, who is now seeking re-election in a weeks' long general election.

Some employees on Wednesday also blamed the government for failing to do enough to rescue Jet.

Before its last flight tonight from Amristar to Delhi, Jet's fleet diminished to just five aircraft and 37 flights from 123 planes and some 650 daily flights till December last.

The crisis at Jet, which owes vast sums to suppliers, pilots, lessors and oil companies, has deepened in recent weeks as its lessors have scrambled to deregister and take back planes, in a sign the bailout plan had failed to assuage their concerns.

In the meanwhile, JetPrivilege, the company that handles Jet's loyalty programme JPMiles, said its teams are in constant touch with the customers hit by flight cancellations and offering them best available optional flights and routes to enable them continue on their booked holidays.

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