Discount airline Jetsgo obtained court protection from creditors on Friday and grounded its jet fleet, stranding 17,000 passengers during the March break school holidays, one of the busiest travel periods of the year in Canada.

In a court affidavit, Montreal-based Jetsgo, which has 1,200 employees and is the country's third-largest airline, said it lost about CAD$55 million (USD$49 million) over the past eight months, on top of a CAD$9.6 million loss in the year to June 27, 2004.

Jetsgo said it had a negative net worth of about CAD$19 million and that its business was no longer viable because air fares were well below cost.

The privately held company was already under scrutiny from Canadian regulators because of safety and operational concerns. Transport Canada this week gave the airline 30 days to rectify problems.

In February it had restricted the airline to flying no higher than 28,000 feet, which adds to fuel costs.

"They'd grown too fast and it was putting strains on senior management," said a spokeswoman for the transport department.

Jetsgo, which began flying in mid 2002 and immediately launched a fare war with Canada's other airlines, said it decided to stop operating its fleet of 29 jets because it could not ensure reliable operations, even to repatriate stranded passengers.

Jetsgo blamed its problems, in large part, on a "coordinated attack" on its business by rival no-frills carrier WestJet Airlines.

Analysts said the grounding of Jetsgo, which accounted for about 10 percent of the Canadian domestic airline market, would mainly benefit WestJet.

Jetsgo had recently made incursions into WestJet's western Canada stronghold, while WestJet raised its profile in the Toronto-Montreal-Ottawa triangle.

Clive Beddoe, chief executive of WestJet, said he had been expecting the demise of Jetsgo, which is owned and operated by Montreal businessman Michel Leblanc.

"M. Leblanc told me to my face that what he was going to do was undercut every fare we had until he filled his airplanes," Beddoe told reporters in Calgary. "Well, I hate to say that that's not a very good business model that works."

At Jetsgo's key hubs in Toronto and Montreal, its kiosks and counters were abandoned on Friday morning, leaving passengers bewildered.

"Where are the executives? They should be here to explain. They should be accountable," said Toronto traveler Craig Baumgartner, who was on his way to New Brunswick.

Jetsgo's web site, through which it booked most of its ticket sales, took reservations as late as Thursday night. It was not working on Friday.

In a statement, Leblanc, who has founded or operated three other now defunct airlines in Canada, advised passengers to contact their travel agent or an alternative airline.

The Consumers' Association of Canada said the government had failed to protect those who bought tickets on the airline.

"Jetsgo couldn't have picked a better time for themselves to pull the plug -- at the start of one of the busiest travel periods, when they have received funds from all of those people who will receive nothing in return except disappointment, frayed nerves and more expense," said association vice-president Mel Fruitman.

Credit card companies promised to reimburse cardholders who purchased Jetsgo tickets but were unable to fly. Those who bought tickets through travel agencies in Quebec, Ontario and British Columbia were also entitled to refunds.

Air Canada said it was deploying larger aircraft on a number of domestic flights to help Jetsgo passengers. WestJet offered stranded Jetsgo passengers and crew special lower-priced fares and said it would delay plans to retire 18 older aircraft.