Iceland's WOW air became the latest budget airline casualty on Thursday, halting operations and cancelling all future flights after efforts to raise more funds failed.

WOW, which focused on low-cost travel across the Atlantic, advised stranded travelers to seek flights with other airlines. It flew a total of 3.5 million passengers last year.

"This is probably the hardest thing I have ever done but the reality is that we have run out of time and have unfortunately not been able to secure the funding of the company," WOW CEO and founder Skuli Mogensen wrote in a letter to the company's 1,000 employees.

"I will never be able to forgive myself for not taking action sooner," he added.

WOW had earlier postponed flights on Thursday as it entered what it had hoped were the final stages of an equity raising with a group of investors.

"My flight from Boston has been canceled. Having a hard time getting through to anyone on the phone. Can you help me at all?" Twitter user Marc Solari wrote.

WOW replied with an apology and offer of further assistance.

WOW is the latest budget airline to collapse as the European airline sector grapples with over-capacity and high fuel costs. Recent failures include Britain's Flybmi, Nordic budget airline Primera Air and Cypriot counterpart Cobalt.

"Rescue Fares"

Other airlines including, Icelandair, Easyjet and Norwegian stepped in offering discounted 'rescue fares' to stranded passengers, according to the Icelandic Transport Authority

WOW has been pursuing different avenues to raise money over the past few months.

It ended talks with rival Icelandair last Sunday while veteran low-cost airline investor Bill Franke also had canceled a proposed investment through private equity fund Indigo Partners.

Icelandair shares traded up 13 percent at 1215 GMT after the failure of a competitor.

Founded in 2011 by entrepreneur Mogensen, WOW used smaller single-aisle planes to fly between Iceland and many destinations in the United States and Europe.

Its website had advertised flights from London to cities such as New York and Boston for as little as 150 pounds, although the journey went via the Icelandic capital Reykjavik.

Norwegian Air has a little over half of the market share in the fast-growing, low-cost, long-haul transatlantic market, while WOW controlled a quarter in 2018.

There are fears of a knock-on effect on Iceland's important tourism industry.

Around 30 percent of tourists visiting Iceland last year flew with WOW and the collapse could trigger a 16 percent drop in tourists this year, research from Icelandic bank Arion showed.