British holiday operator folds over rising fuel costs (Roundup)

Sep 12, 2008, 11:46 GMT

London - Britain's third-biggest travel operator and package holiday group, XL, has gone into administration as a result of spiralling fuel prices, leaving tens of thousands of holidaymakers stranded, the company said Friday.

The XL Leisure Group, which operates XL Airways, flies to 50 destinations in Europe and the US from 12 British airports. All its flights were cancelled Friday and its aircraft grounded.

'The companies entered into administration having suffered as a result of volatile fuel prices, the economic downturn, and were unable to obtain further funding,' a statement on the XL website said.

The XL group, which is based in Crawley, south of London, owns several travel companies, including Travel City Direct, Medlife Hotels Limited, The Really Great Holiday Company, Freedom Flights and Kosmar Holidays.

At a news conference in London Friday, XL chief executive Phil Wyatt said the group had debts of 143 million pounds (253 million dollars), but insisted that it need not have failed.

Talks to rescue the company had been going on until late Thursday evening and individuals had come forward with 'money potentially to put into the business,' he said.

The group, which carried 2.3 million passengers last year, has 1,700 employees worldwide.

A spokesman for administrators Kroll said Friday the firm was still looking for ways to save XL. 'We are not thinking about liquidation at the moment. We are thinking about a rescue plan for the survival of parts of the business.'

XL's main lender, Iceland's leading investment bank, Straumur, said it 'deeply regretted' the firm's fall into administration despite 'considerable financial restructuring efforts over a sustained period.'

Straumur said its current exposure to XL was 45 million euros (63.4 million dollars), and it was uncertain as to how much would be recovered.

Straumur has bought XL's German and French subsidiaries, which it considers to be 'financially viable and sustainable businesses.'

'The problems facing the airline industry in general are well documented and Straumur has been working closely with XL's management towards a solution to the difficulties facing the company,' a statement said.

The Financial Times said Friday that XL's problems became evident recently when the company was forced to scrap its winter holiday programme to destinations in the Caribbean.

The Civil Aviation Authority (CAA) said an estimated 67,000 people were stranded abroad and 200,000 had made advance bookings with the company.

Travellers stranded abroad would be repatriated by other carriers and on substitute aircraft.

Wyatt, who insisted that it had not been necessary to ground the XL fleet, said Friday: 'The CAA have a huge challenge on their hands. It's going to be the most challenging airlift ever undertaken.'

Passengers who booked packages through the group's own tour operators were protected by the CAA's ATOL insurance scheme, but those who booked directly with XL Airways were urged Friday to contact ATOL for refunds.

The demise of XL is the latest blow to the British travel industry, following the collapse of budget airline Zoom last month.

Zoom, which offered flights to North America, blamed its problems on rocketing fuel bills as a result of the high cost of oil.

On Friday, a spokesman for top TUI holiday group said that rising fuel costs meant that 'airlines with less than robust business models' were now failing.