Sept. 12 (Bloomberg) -- XL Leisure Group Plc grounded all flights and stranded thousands of passengers as court-appointed administrators took control of the tour operator, the second British travel company to collapse in a month.

XL's Web site today said the company was unable to obtain further funding amid ``volatile'' fuel prices and slowing economic growth. The U.K.'s Civil Aviation Administration said as many as 89,000 people may be stuck overseas, and another 200,000 have bookings with the Crawley, England-based company.

Record oil prices led 24 operators to collapse or file for bankruptcy in the first half of 2008, the International Air Transport Association says. Zoom Airlines, which operated trans- Atlantic services from London's Gatwick Airport, folded last month, when Alitalia SpA also filed for bankruptcy protection. TUI Travel Plc and Thomas Cook Group Plc rose in London trading on optimism XL's failure will allow them to boost prices.

``It highlights how difficult the operating environment is, with significant cost pressures coming to bear at a time when consumer demand is weakening,'' Collins Stewart analyst Andrew Fitchie said in note. ``However, capacity rationalization is good news for the industry's long-term health.''

Privately held XL is the U.K.'s third-largest travel operator and employs about 1,700 people worldwide. Managers including Chief Executive Officer Philip Wyatt bought control of the company from Iceland's Avion Group Hf in 2006.

Flights Canceled

``It's difficult to absorb an $80 million increase on fuel,'' Wyatt said during a press conference at Gatwick today. ``Prices moved so rapidly.''

The price of crude oil spiked to $147.27 a barrel in July before retreating. XL bought contracts for 45 percent of its fuel requirements over the year at $750 a metric ton, leaving it vulnerable to price increases, Wyatt said. Air France-KLM Group, Deutsche Lufthansa AG and British Airways Plc, Europe's three largest airlines, have agreed prices for at least 80 percent of their fuel needs for this fiscal year, Bloomberg data shows.

British Airways, Europe's third-largest carrier, today said it may cut more than a thousand management jobs as its fuel bill will probably surge 50 percent this year.

A resuscitation of XL is unlikely in its current form, administrator Alistair Beveridge told reporters, adding that he's been contacted by potential buyers for parts of the company.

Administrators

XL owes Icelandic lender Landsbanki Islands hf 207 million euros ($292 million), Wyatt said. The loan is guaranteed by Hf Eimskipafelag Island, and Landsbanki ``do not anticipate any loss,'' according to spokesman Andrew Walton.

Investors led by Bjorgolfur Gudmundsson and Bjorgolfur Thor Bjorgolfsson ``will acquire the claim,'' which may be made by Jointrace Ltd., ``should it fall on the company,'' Eimskipafelag said in a statement today. Jointrace is XL's parent, according to Bloomberg data.

Iceland's Straumur-Burdaras Investment Bank hf today said it's owed 45 million euros and will acquire XL's French and German airline units.

Kroll Inc.'s Beveridge, Nick Cropper, Simon Appell and Stuart Mackellar have been appointed joint administrators today. They ``cannot continue trading the business and therefore all flights operated by the companies have been immediately canceled and the aircraft grounded,'' according to the statement.

Administration for troubled companies under U.K. bankruptcy law allows outside administrators to assess whether a business is salvageable or whether it should be wound down.

TUI Travel, Thomas Cook

Stranded passengers who incur costs returning to the U.K. should apply to insolvency specialist Kroll Ltd., XL said. Among the company's units, XL Leisure, XL Airways UK Ltd., Excel Aviation Ltd., Explorer House Ltd., Aspire Holidays Ltd., Freedom Flights Ltd., Freedom Flights (Aviation) Ltd., The Really Great Holiday Company Plc, Medlife Hotels Ltd., Travel City Flights Ltd. and Kosmar Villa Holidays Plc are all in administration.

TUI Travel Chief Executive Officer Peter Long said by phone that Europe's largest tourism company will help with flying XL customers home, as will rivals Thomas Cook and Virgin.

``The CAA will have a huge challenge on their hands'' to get stranded passengers back to the U.K., Wyatt said, ``It's going to be the most challenging airlift anyone has undertaken.''

Ryanair Holdings Plc, Europe's biggest discount airline, said it will lend the CAA one of its aircraft for the next two weeks to help holidaymakers get home. EasyJet Plc, Europe's the second-largest European budget carrier, said it will offer flights to stranded XL passengers for 75 pounds ($133).

West Ham

TUI Travel added 16.25 pence, or 7.3 percent, to 238 pence in London trading, while Thomas Cook jumped 15.75 pence, or 6.7 percent, to 250.75 pence.

XL, which sponsors English soccer team West Ham United, offered flights and holidays to 50 destinations, including Florida and resorts on the Mediterranean and Caribbean seas.

One XL jetliner and its passengers and crew remain outside the U.K., in Orlando, Florida, Wyatt said. The timing of the administration announcement was chosen to allow as many flights as possible to return home, he added.

Wyatt said that of 67,000 XL passengers waiting to return to the U.K., 2,000 to 3,000 aren't safeguarded by the Civil Aviation Authority's Air Travel Organisers' Licensing program, which protects travelers from being stranded or losing payments. Those without protection will have to re-pay for seats, he said.

`Ridiculous Situation'

``Regretfully this is a ridiculous situation and we are working with the CAA to lobby government for a comprehensive package of protection for customers,'' TUI Travel's Long said.

Shermann Dennis, an XL passenger at Gatwick, said his trip to Sanford, Florida with his wife was protected by ATOL.

``We're going to have to go home,'' said Dennis, 41. ``We can't afford to spend another 800 pounds each to get out there. They didn't say how long it will take to get the money back.''

Candice Beard, a 25-year-old passenger waiting for a flight to Greece, said she had no warning of the canceled flights. ``We just woke up this morning and had to see it on the news.''

Zoom cited soaring fuel prices for its failure last month, which stranded thousands of passengers in Canada and Britain. Today, Italian financier Roberto Colaninno pulled out of talks to buy Alitalia after unions failed to back a rescue plan.

To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Andrew Cleary in London at acleary7@bloomberg.net.

Last Updated: September 12, 2008 11:51 EDT