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Budget airline Zoom collapses

David Browne  Aug 29, 2008

LONDON (eTN) - Budget airline Zoom has collapsed with its planes grounded in Scotland and Canada. Zoom is the latest airline to suffer under the pressure of high fuel costs. The line employed 600 people in the UK and Canada and all have lost their jobs. Passengers who booked direct with the airline through its website must try to get their money back from their credit card companies.

A statement from the airline posted on its website Thursday night said it deeply regretted the inconvenienced caused to passengers and employees, and blamed the rising cost of fuel for its failure.

"The collapse of Zoom is a result of matter beyond our control. Only last year Zoom Airlines made profit, but that turned into a loss in the last year due to the unprecedented increase in the price of aviation fuel and the economic climate.

"The price of oil resulted in our fuel bill jumping by nearly $50 million in one year and we could not recover that from passengers who had already booked their flights."

Zoom was founded by Scottish millionaires Hugh and John Boyle and flew services from regional airports in the UK to Canada, New York and the Caribbean. In a statement they said they deeply regretted that they had been forced to cease trading. "It is a tragic day for our passengers and more than 600 staff. We are desperately sorry for the inconvenience that this will cause passengers and those who have booked flights.

"We have done everything we can to support the airline and left no stone unturned to secure a refinancing package that would have kept our aircraft flying. Even as late as today we had secured a new investment package but the actions of creditors meant we could not continue flying."

The action by creditors included an order by the British Airport Authority Thursday morning to ground a plane at Glasgow airport over unpaid air traffic control fees. 205 passengers headed for Halifax and Ottawa were left stranded. Zoom advised them to rebook on other airlines flying to Canada. Virgin Atlantic and BA said they would offer cut-price fares to Zoom ticket holders.

During the day fuel suppliers refused to refuel Zoom aircraft unless they were paid in cash and a full tank of aircraft fuel costs $60,000. Zoom has been operating from London Gatwick, Manchester, Cardiff and Belfast to cities in Canada including Vancouver, Calgary and Halifax. It also operated charter flights to Florida and Caribbean vacation resorts.

Zoom is the latest casualty in the aviation credit crunch. Silverjet the budget business-class airline operating between London Stansted and New York went bust earlier this year and Oasis, a low-cost airline operating out of Hong Kong closed in April. Industry analysts are predicting that more airlines will go out of business in the coming months.

One of biggest names under threat is the Irish airline Aer Lingus, which is expected to lose about 30m Euros (US$45m) this year and must make big cuts in running costs if it is to avoid bankruptcy in the near future. The Italian government has changed the law to pave the way for a rescue of the troubled flag-carrier Alitalia. But further government aid is likely to ruled illegal by the European Union. Alitalia has not made a profit since 1999. An attempt to sell the airline to Air France KLM collapsed under opposition to non-Italian ownership from politicians and labor unions.

Budget airline Zoom collapses

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