Sterling Airways to file for bankruptcy

COPENHAGEN, Denmark - Icelandic-owned budget carrier Sterling Airways A/S filed for bankruptcy Wednesday, hurt by the nation's financial meltdown, and said it will not be able to refund passengers who bought tickets on line.

The airline, which is based in Denmark, said it was unable to raise financial support for a restructuring program due to the collapse of the Icelandic financial system. Iceland raised its key interest rate by 6 percentage points Tuesday to meet the requirements of a $2 billion rescue loan from the International Monetary Fund.

"During the last few weeks the management, board of directors, and the shareholder of Sterling Airlines A/S have been fighting a battle to keep the company alive," the airline said in a statement on its Web site. "Sadly, this has not had a positive outcome, and we have therefore decided to file for bankruptcy."

The Copenhagen Maritime and Commercial Courts said it had received Sterling's bankruptcy application on Wednesday.

Officials at Sterling were not immediately available for comment. But the Danish news agency Ritzau said the company declined to say how many passengers would be affected by the canceled flights, and the Star Tours travel agency estimated the number at 30,000 to 40,000.

Ulrik H. Marschall, a spokesman at SAS Denmark, said his company would offer Sterling passengers and crew members seats on its flights to Copenhagen, depending on availability. "This is a voluntary undertaking aimed at helping out," he said.

Oslo, Norway-based budget carrier Norwegian Air Shuttle ASA, which has operated some joint flights with Sterling, said it will open new routes from Stockholm and Copenhagen to fill the gap left by its bankrupt partner. Norwegian said it will also open a new hub in Copenhagen.

Sterling, owned by Iceland's Northern Travel Holding, operated low-frills flights within Scandinavia, and between Scandinavia and a range of European destinations.

The carrier said it was hit in 2007 by a slowdown in the market and rising fuel prices, and it started accumulating large losses this year.

It implemented a restructuring program to reduce the fleet and staff, which was planned to take full effect next year. However, the funding for the program vanished when the Icelandic owner was hit by the crisis in the island nation's banking system.

"Negotiations have been conducted with several potential investors, but it was impossible to make ends meet," the airline said. "The inevitable result is that Sterling Airlines A/S has no option but to file for bankruptcy."

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