New Delhi: Jet Airways India Ltd was once at the forefront of India’s rapidly growing market for air travel, but a challenge from budget carriers and surging fuel prices are backing the airline into a corner. The carrier, part-owned by Etihad Airways PJSC, postponed announcing its first-quarter earnings on Thursday, less than a week after denying a report that it needs drastic measures to cut costs and bolster its finances. Mumbai-based Jet Airway’s shares have slumped this year as its finances deteriorated and the default risk on its debt obligations increased. On Friday, Jet Airways shares plunged as much as 13.29% to 261.60 in opening trade.

Budget airlines such as IndiGo, GoAir and SpiceJet expanded exponentially in the past decade, giving first-time flyers a new opportunity and middle-class families an alternative to full-service carriers that offered lounges and free meals on board. India, the world’s fastest-growing major aviation market, is also one of the toughest in which to survive, with premium carrier Kingfisher Airlines collapsing and legacy carrier Air India needing repeated state bailouts as ultra-low fares fail to cover their costs.

“Jet Airways is facing challenges on all fronts," Bloomberg Intelligence’s Singapore-based analyst Rahul Kapoor said. “The rise in oil prices is having a double whammy on their earnings. They already have a sparse balance sheet compared with other Indian carriers."

India is one of the toughest markets, where airlines are forced to sell tickets at base prices of as low as 1 to attract the fastest growing middle class in the world. Kingfisher Airlines, started by Indian tycoon Vijay Mallya in 2005, was one of the nation’s leading carriers until it was grounded in 2012 amid mounting debt. Indian airlines are among the biggest customers for the single-aisle planes made by Airbus SE and Boeing Co.

Jet Airways had total debt of 943 crore, and cash and equivalents of 32 crore for the year ended 31 March, according to Bloomberg-compiled data. The firm’s total debt ballooned to 55.4 times earnings before interest and tax as of 31 March, compared to 4.9 times the previous year, the data showed.

In a brief statement late Thursday night, the company—with a market value of $499 million—said the audit committee didn’t recommend the results for the board’s approval, “pending closure of certain matters." The company slipped into a loss in the year ended March following two years of profit.

The probability of the airline failing to repay its obligations in the next 12 months is near the highest since October 2015, according to a Bloomberg Default Risk model, which tracks metrics including share price, debt and cash flow. SpiceJet’s risk is the most elevated since last February, and the gauge is little changed for IndiGo, the nation’s biggest airline.

Deputy chief executive officer Amit Agarwal said Jet Airways has regularly met its commitments on loans and is constantly evaluating opportunities to refinance or increase the tenure.

Jet Airways stock has tumbled 64% this year, making it the worst performing airline stock in Asia Pacific. The shares are headed for their worst year since 2011 amid investor concerns over its outlook. India’s benchmark Sensex index has gained 12%.

“We need to recover the money and value we have lost," Jet Airways Chairman Naresh Goyal said at the airline’s annual general meeting Thursday. “I feel guilty, I feel embarrassed that we have not been able to perform, especially with shareholders who stood with us."

Jet Airways’s rivals are faring no better either. The entire sector has been hit by rising fuel prices, depreciation of the rupee and debt to fund aircraft purchases and rapid growth. IndiGo, operated by InterGlobe Aviation Ltd, posted a 97% drop in net profit, its worst-ever quarterly performance. SpiceJet will be reporting earnings next week.

Jet Airways said last week that it’s implementing several measures to reduce costs and increase revenue, in areas including sales and distribution, payroll and maintenance. The company at the time denied an Economic Times report it had already started firing people and had told some workers to take as much as a 25% cut in pay.

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