"All flights have been cancelled and passengers are being advised to seek bookings with alternative airlines," the Ottawa-based airline said in a statement.

"The unprecedented rise in the price of aviation fuel which resulted in a $50-million increase in operating costs during the last year and the general economic downturn had made it impossible for operations to continue."

After two of its jets were grounded on Thursday morning, the airline said its woes were "a direct consequence of the horrendous increase in the price of aviation fuel and the economic climate" of late, which have negatively affected all airlines over the past year.

Extra fuel costs could not be passed on to customers who had booked flights far in advance, it noted. Combined with pressure from creditors, the airline had no choice but to begin "insolvency proceedings," it said.

Zoom employed 450 staff in Canada and 260 staff in the United Kingdom, operating flights from London Gatwick, Glasgow, Manchester, Cardiff, Belfast, as well as Paris and Rome, to eight destinations in Canada, New York, San Diego, Fort Lauderdale and Bermuda.

"We deeply regret the fact that we have been forced to cease all Zoom operations," said its founders Hugh and John Boyle. "We are desperately sorry for the inconvenience that this will cause passengers and those who have booked flights."

Zoom's troubles first showed on Thursday morning when one of its planes was reportedly grounded in Glasgow for failing to pay airport fees, and another in Calgary was yanked out of service by a company that leased the jet to the carrier.

In both cities, upset and confused passengers were left stranded at terminals, with only the media to talk to them.

At midday, the company believed it had secured new investment "to ensure future operations," but "the actions of creditors meant we could not continue flying," Hugh Boyle said.

Thus, the company announced it was seeking court protection from creditors in both Canada and Britain.

"We have sought creditor protection by filing legal notices of intention to appoint an administrator in both the United Kingdom and Canada," Hugh Boyle said.

Transport Canada spokesperson Jean Riverin, meanwhile, told AFP the company had "voluntarily returned its operating license to Transport Canada."

AFP