May 30 (Bloomberg) -- Silverjet Plc, the U.K. carrier founded 16 months ago to fly business travelers to New York, grounded planes after running out of cash, the industry's latest casualty as spiraling fuel costs wipe out earnings.

Silverjet, whose last flight left Dubai today for the carrier's base at London Luton Airport, failed to get $5 million in emergency funding from investor Viceroy Holdings LLC, the company said in a statement.

Silverjet, which never made a profit, was the last of three business-class only operators flying between London and the U.S. after the bankruptcy of Eos Airlines and MAXjet Airways Inc. More than a dozen carriers have collapsed in the past six months after the price of oil jumped 41 percent. The industry may report $40 billion in combined losses this year, more than three times the level after the Sept. 11 terrorist attacks, according to independent airline analyst Chris Tarry.

``This shows the pain that the airline industry is suffering,'' said John Strickland, director of aviation specialist JLS Consulting Ltd. in London. ``Silverjet was the last of a particular breed but I think we'll see other failures across different parts of the market in the next 12 months.''

Share Suspension

Silverjet had its shares suspended a week ago after the investment from United Arab Emirates-based Viceroy didn't materialize. The stock was halted at 13 pence, 88 percent lower than when it was first sold to the public in May 2006, giving a market value of 8.38 million pounds ($16.5 million).

Chief Executive Officer Lawrence Hunt said May 2 that Viceroy promised $100 million in cash and loans to keep Silverjet flying. No proceeds were received, the company said today.

``It is with deep regret that the board of Silverjet has therefore decided that it must suspend operations with immediate effect,'' the carrier said, adding that it is still in talks with other potential investors. Almost 10,000 Silverjet customers will be affected by the grounding, Britain's aviation regulator said.

Soaring fuel costs are forcing airlines to consolidate to survive. Delta Air Lines Inc. and Northwest Airlines Corp. agreed to merge April 14 in a tie-up that will create the world's largest carrier. UAL Corp.'s United Airlines is seeking an alliance with Continental Airlines Inc. after suspending merger talks with US Airways Group Inc., two people familiar with the negotiations said yesterday.

Oil is trading near $125 a barrel, compared with about $55 when Silverjet started flying on Jan. 25, 2007. Higher fuel expenses have contributed to the collapse of other airlines in recent weeks, including long-haul budget carrier Oasis Hong Kong Airlines Ltd., Columbus, Ohio-based Skybus Airlines Inc. and Frontier Airlines Holdings Inc. of Denver.

`Brutal Reality'

``A crisis point is fast approaching for the aviation industry,'' London-based Numis Securities analysts Wyn Ellis and Richard Carter said in a note to investors yesterday. ``There are likely to be a number of spectacular casualties as brutal economic reality hits home.''

MAXjet and Eos blamed their bankruptcies on higher fuel costs, competition from network carriers and an inability to raise more capital because of the global tightening of credit.

Before the Viceroy pledge, Silverjet had gleaned about 72 million pounds from an initial share sale, additional stock offerings and loans. The carrier cited the oil price when missing its target of a first profitable month in March.

Airline stocks pared losses today after the price of crude fell for a second day as record prices reduced demand for gasoline and jet fuel. Air France-KLM Group, Europe's biggest carrier, rose as much as 8.4 percent and British Airways Plc, the No. 3, advanced 8.7 percent. The eight-member Bloomberg Europe Airlines Index jumped the most since April 1.

Hassle-Free Service

Network airlines get most of their earnings from first- and business-class seats, prompting the idea for premium-only carriers. Congestion at U.K. airports and delays from tighter security also created demand for a hassle-free, luxury service.

Silverjet aimed to sell business-class tickets for about 1,000 pounds, often one-third the price charged by competitors such as British Airways and Virgin Atlantic Airways Ltd. Flights were operated using three Boeing Co. 767 planes with 100 flatbed seats, or less than half the usual capacity. Service included private terminals, onboard women-only toilets and gourmet menus from London restaurant Le Caprice.

Analysts including Mike Stoddart of Daniel Stewart in London had predicted Silverjet would go bankrupt this year as it failed to sell enough seats at high enough prices to cover its costs. Stoddart initiated coverage of the company in January with a ``sell'' recommendation and a price target of zero pence.

``It was the fares that were the original selling point and we didn't see how they could make a profit on those,'' the analyst said today. ``It's sad in a way because they did make a lot of customers happy over the time they were operating.''

Singapore Air Experiment

Singapore Airlines Ltd., the world's second-largest carrier by market value, started an all-premium service on May 17, while British Airways plans to begin business-only flights to New York next year. PrivatAir Group has operated services for Deutsche Lufthansa AG, Europe's second-biggest airline, since 2002.

``Silverjet and its cousins do leave behind a legacy and you're seeing the model being adopted by carriers like British Airways,'' said Douglas McNeill, an analyst at Blue Oar Securities in London who had a ``hold'' rating on Silverjet. ``Silverjet was undone by the fuel price.''

McNeill said he couldn't entirely rule out Silverjet finding an investor to rescue it but that the climate for raising capital in the airline industry is currently ``the worst it's ever been.''

Closely held L'Avion, which flies between Paris and New York, is the last remaining independent airline providing premium-only services across the Atlantic.

To contact the reporter on this story: Tracy Alloway in London at talloway@bloomberg.net

Last Updated: May 30, 2008 07:39 EDT