"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 on Wednesday. "Sadly, this has not had a positive outcome, and we have therefore decided to file for bankruptcy which will be done later today."
Sterling said it won't be able to refund passengers who have bought tickets from the company Web site.
The company, owned by Iceland's Northern Travel Holding, operated low-frills flights within Scandinavia, and between Scandinavia and a range of European destinations.
Sterling said it was hit in 2007 by a slowdown in the market and rising fuel prices, and the airline 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 North Atlantic island'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."