Johannesburg — CASH flow problems, rising fuel costs and the failure of a proposed black empowerment deal yesterday grounded budget airline Nationwide, which said it was halting all flights with immediate effect.

The collapse of the airline, which operated about 50 local and international flights daily, has left thousands of would-be travellers stranded.

To add to the airline's cash woes, it emerged yesterday that a proposed empowerment deal with the African General Equity Group (AGE), chaired by Wiseman Nkuhlu , had failed to come to fruition.

"Our cash flow has become critical and (we) have decided to voluntarily cease all flight operations ... we apologise to our loyal customers for any and all inconveniences experienced," CE Vernon Bricknell said . Nationwide's attorney Haroon Laher, confirmed there were no funds to continue operations.

A provisional liquidator would be appointed today to deal with passengers who had already booked flights until the end of the year, as well as to try and sell the business as a going concern.

Laher said "all is not lost" and, a due diligence had been concluded last week on Nationwide for the Industrial Development Corporation. It was to have been the main funder for AGE to buy a stake, and the meeting to approve the funding had been scheduled for May 15.

"The airline ran out of cash to pay its creditors on time," Laher said.

Bricknell said the airline's woes started when an engine fell off one of its aircraft on its departure from Cape Town International Airport last November .

SA's Civil Aviation Authority had forced the airline to ground its fleet for a protracted period while the aircraft were checked.

Nationwide's passenger numbers fell dramatically in December because of negative publicity.

"In the months of December and January, we resumed operations and attained a gradual recovery of the business. However, in March and April we faced a 30% increase in fuel costs coupled with a decrease in passenger load factors," Bricknell said.

"Throughout this period, we continued to work towards securing investment by a black empowerment consortium, which unfortunately has not come to fruition."

Bricknell is the main shareholder, owning a 56,2% stake through the Bricknell Trust and the rest is held by Aerotrans, an Isle of Man-based company.

In March AGE said it was interested in acquiring a 51% stake, which would have created SA's first black-controlled airline. On March 31, Bricknell secured a R10m loan facility to continue operations until the deal was finalised.

It was expected AGE's investment would have helped the airline meet its immediate-to-medium term funding needs and help modernise its fleet, while extra international routes were planned . AGE spokesmen could not be reached for comment yesterday.

Laher said Bricknell had done all he could to preserve about 1000 jobs that were at risk.

"This liquidation was a very last resort. Up until this weekend we had the support of creditors, but we had no funds available," Laher said.

Nationwide's immediate debts included R10m to BP Southern Africa, R9m to Airports Company SA, R1m to the Air Traffic Navigation Authorities and R3,5m owed to LSG Sky Chefs.

Mango CEO Nico Bezuidenhout said the grounding was an "unwelcome surprise" as it came at a time the SA aviation industry had experienced "robust growth" in the past 18 months.

Calls to Nationwide's reservations and corporate offices remained unanswered yesterday.