Lithuania's national carrier, FlyLAL-Lithuanian Airlines, filed for bankruptcy on Friday, a week after it suspended its flights and left hundreds of travellers fuming, dpa reported.
The airline confirmed in a press release that it had asked the Vilnius regional court to commence formal bankruptcy proceedings.
"We looked at all possible options to continue operations, but being unable to continue flights and seeing no real possibilities for resuming our operations, we were forced to file for bankruptcy," said chief executive Vytautas Kaikaris.
The airline reportedly owes nearly 18 million dollars to creditors and has unpaid bills at Vilnius airport, its home base, of 7.5 million litas. Reimbursing bought tickets adds a further 2 million dollars to the airline's obligations.
Its total assets of some 33 million dollars are not of sufficient quality to allow it to continue operating.
However, FlyLAL's-Lithuanian airline's directors can forget about asking for a state handout, according to a statement issued by the Lithuanian transport ministry.
"If the shareholders of FlyLAL-Lithuanian Airlines truly wish to help the company's customers who have been hit by its collapse, they could do that on the account of profitable companies of FlyLAL Group," said Transport Minister Elijijus Masiulis.
A special working group is due to report to Masiulis on the state of FlyLAL-Lithuanian Airlines on January 26.
FlyLAL claimed in early January that it was on the verge of signing a buyout deal with investment group Swiss Capital Holding, but it fell through with each side blaming the other.
A group of prominent Lithuanian businessmen bought Lithuanian Airlines from the state in 2005. Awkwardly re-branded as FlyLAL- Lithuanian Airlines, the core business never really took off, though a technical services division was successfully spun off as a separate company and remains profitable.
Much of the reason for FlyLAL-Lithuanian Airlines' failure stems from it coming off second best in competition with Latvian rival airBaltic.
airBaltic managed to streamline its operations under German businessman Bertolt Flick more effectively and still attracts many Lithuanians across the border to fly from Riga airport.
The inter-Baltic rivalry between the two airlines took a bizarre twist in late 2008 when FlyLAL-Lithuanian Airlines attempted to place Riga airport under injunction using a court order from a Lithuanian local court, citing unfair competition.
However, such headline-grabbing tactics failed to address the problems in the core business.