Flybmi has ceased operations and is filing for administration, with all flights cancelled from 16 February.
The East Midlands-based airline operated 17 regional jet aircraft on routes to 25 European cities.
A spokesperson said: “It is with a heavy heart that we have made this unavoidable announcement today. The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU’s recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme.
"These issues have undermined efforts to move the airline into profit. Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around bmi’s ability to continue flying between destinations in Europe. Additionally, our situation mirrors wider difficulties in the regional airline industry which have been well documented.
“Against this background, it has become impossible for the airline’s shareholders to continue their extensive programme of funding into the business, despite investment totalling over £40m in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable.
“Our employees have worked extremely hard over the last few years and we would like to thank them for their dedication to the company, as well as all our loyal customers who have flown with us over the last six years.”
The announcement follows yesterday's news that the Department for Transport and the Northern Ireland Department for the Economy had agreed a new two-year subsidy for flights between Stansted and the City of Derry airport. Those flights have been subsidised by the DfT and the Derry City and Strabane District Council since May 2017, with Flybmi operating the route 13 times per week on a 49-seat aircraft.
The airline added in a statement on its website: "Customers who booked directly with flybmi should contact their payment card issuer to obtain a refund for flights which have not yet taken place. Customers who have booked flybmi flights via a travel agent or one of flybmi’s codeshare partner airlines are recommended to contact their agent or airline for details of options available to them."
The airline employs a total of 376 employees across the UK, Germany, Sweden and Belgium. In 2018, it carried 522,000 passengers on 29,000 flights.
Flybe, meanwhile, issued a statement on Twitter saying its thoughts were with the airline's staff, and to reassure any customers who may have confused it with the Flybmi: "We are very sorry to hear about the situation with the competing British regional airline Flybmi and our thoughts are with their employees during these difficult times. Flybe has nothing to do with Flybmi and our flights continue to operate as normal."
Flybe itself is awaiting shareholder approval for a potential deal that would see Virgin Atlantic, as part of a consortium with Stobart Group, purchase the carrier. The airline's board agreed the £2.2m sale to Connect Airways group last month, but the deal needs investor approval during a meeting on 4 March.