HONG KONG : Hong Kong-based budget airline Oasis has gone bust.

Amid an environment of higher fuel costs and reports of massive debts, Oasis applied for voluntary liquidation in court on Wednesday.

Its flights to Vancouver and London won't take-off from Wednesday night onwards, and thousands of passengers who have booked with them are affected.

Barely two years old, Oasis was launched with much fanfare, offering one-way flights from Hong Kong to London for as little as US$128.

Founded by Raymond Lee, a Christian minister and property investor, Oasis pushed the budget airline model further by offering free meals, in-flight entertainment and business-class seats.

But taking-off wasn't smooth going. Its maiden voyage was delayed by 30 hours after the Russians withdrew airspace permission at the last minute.

Passengers who found out about the news of the closure on Wednesday are angry that the websites were still accepting online reservations up to Tuesday night.

"Nobody picked up my calls. So I went online to get the address to come here and get an explanation," said one passenger.

Chief Executive Stephen Miller did not elaborate why Oasis is shutting down, but is confident that a willing investor will be forthcoming to take over its operations.

Earlier, the Hong Kong Economic Times had reported that the troubled carrier was struggling with debts of up to US$128 million.

Newly appointed liquidator KPMG was only informed of the problem late Tuesday night and has yet to see the accounts.

Said Edward Middleton, Provisional Liquidators, KPMG: "If you can give me the financial statement that was based, please do so because I haven't seen any yet. There are passengers whose travel plans are severely disrupted and my focus today, tonight, tomorrow, and the next few days is going to be on them."

It is also not clear how many passengers will be stranded by Oasis's closure, and what sort of compensation package will be given.

The Hong Kong authorities are watching developments closely and extending their help to facilitate the affected passengers. Hardest hit will be Hong Kong students returning to London and Vancouver after the Easter break. They will be given priority for rebooking with other airlines.

The fate of the 700-odd staff employed by Oasis is also uncertain. - CNA /ls