The failed budget airline Zoom could have survived a cash crisis and carried on operating with a fresh injection of funds had it not been for a leasing company's decision to impound one of its planes two days ago, a company spokesman said today.

The airline grounded all of its flights last night and called in the administrators after it became clear that it could no longer afford to fly. It went under owning millions of pounds in fuel costs, leasing charges, airport fees and for other supplies.

Ramsay Smith, the Zoom spokesman, said today that the company was in advanced negotiations for new investment and a refinancing package and the company's founders, Scottish travel entrepreneurs Hugh and John Boyle, had also been supporting the airline.

Then the leasing company Aercap decided on Wednesday night to impound a Boeing 767 at Calgary airport because of unpaid charges, effectively terminating its lease. Zoom executives quickly announced that they would be filing for creditor protection, allowing them to keep operating while the company went into administration.

But news of their troubles spread at internet speed. Another jet was blocked at Glasgow airport as creditors became anxious and within 24 hours the company had gone bust.

"Immediately something like that triggers a domino effect," Mr Smith told Times Online. "Had the investment package been completed then they would have been able to move forward.

"Once the domino effect happened, however, creditors became more aggressive. You literally had a situation where suppliers were saying that they would not fill up the aircraft unless they got money up front and of course that money could not materialise in time. So we were left with no alternative but to suspend."

The company accepts, however, that it faced a massive challenge in meeting fuel costs given that the surge in the price of aviation fuel over the past year had added $50 million to the annual costbase.

Mr Smith said that company executives had been confident that the refinancing would go ahead. "The fundamental thing was that as each day passed they were paying more and more for aviation fuel, so it was getting away from them all the time," he added.

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