"Because of this the board of directors has decided to declare the company bankrupt," Cimber Sterling said in a statement.

In August last year, Mansvell Enterprises Ltd, an investment vehicle of Ukrainian businessman Igor Kolomoisky, offered to buy out Cimber's minority shareholders for 1.50 crowns per share.

The offer for minority shares followed Mansvell's acquisition of a 70.8 percent stake in Cimber through a directed share issue on August 1.

Cimber Sterling (CIMBER.CO), a small rival to Scandinavian airline SAS (SAS.ST), Finland's Finnair (FIA1S.HE) and Norwegian Air Shuttle (NWC.OL), among others, was hit by fierce competition between low-cost carriers and rising costs when it expanded beyond its home Scandinavian region.

"The board of directors and the management team have worked intensely to ensure a turnaround of the company for several months but unfortunately we did not succeed before we ran out of time," Chief Executive Jan Palmer said in the statement.

A court will appoint one or more administrators for the bankrupt airline, Cimber Sterling said, adding that it would work with them to try to preserve as much of the operations as possible under a reconstructed company.

But Cimber Sterling said passengers tickets were "worthless" and the airline's website said all flights were cancelled.

"It is the expectation that a plan can be drafted within the next three days concerning the future of the company activities," Cimber Sterling said.

Last month, the company said it would dismiss 890 people and change its strategy to focus on domestic traffic.

(Reporting by Copenhagen Newsroom; Editing by Richard Pullin and Mike Nesbit)

• A Permanent Economic Emergency