Swedish budget airline FlyMe halted operations with immediate effect and will file for bankruptcy, the company said on March 1 - a move affecting thousands of passengers.

FlyMe Sweden AB said it was not able to raise as much cash as expected through a rights issue, and had advised some 2,500 passengers, scheduled to fly with the airline that day, about the bankruptcy with mobile phone text messages overnight.

It was not immediately clear how many more passengers had reserved FlyMe flights in the next few weeks.

The Goteborg, Sweden-based airline started operations in 2004 and operated a service from three Swedish cities to about a dozen European destinations, including London, Nice in France, and the Czech capital, Prague.

FlyMe officials were not immediately available for comment, but Chief Executive Officer Finn Thaulow told Swedish news agency TT that the company did not have enough liquid assets to continue operations.

Danish airline Sterling Airlines A/S said it will replace FlyMe's flights from Goteborg, the Danish capital of Copenhagen, as well as Swedish cities Malmo and Stockholm.

Sterling spokesman Stefan Vilner said Sterling was taking over the FlyMe flights because it had already earlier planned to enter the Swedish domestic market.

"We will start operating on March 2," he said, "and we're also looking at starting other routes, but we will take a closer look at that next week."