Around 85,000 British tourists are stranded abroad after the UK’s third largest package holiday group, the XL Leisure Group, which operates XL airlines, went into administration, causing all flights to be cancelled and its aircraft grounded.

The Civil Aviation Authority (CAA) said that it was making arrangements to help customers of the four tour companies within the XL group.

David Clover, a spokesman for the CAA, said: “In respect of people who are currently abroad we’re making arrangements and working very closely with the travel industry to organise repatriation flights.

“Clearly though, with XL Airways no longer operating, we’re having to bring in substitute aircraft to bring people home.”

He said that package deals are covered by the CAA’s Air Travel Organisers’ Licensing (ATOL) scheme and those customers will be offered repatriation or their money back if they are on of the 200,000 people who have and advance booking. He advised those with future flights to check their insurance polices, and with their banks or credit card companies about refunds.

Unfortunately anyone who booked directly with the airline or on XL.com will face a fee. However, the CAA says they are in the minority.

The group is the latest travel business to face financial hardship, as the industry struggles with high fuel costs ad an economic downturn.

“As the travel industry matures in Europe, there was always going to be pressure on those operating in the mid-market,” said Last.minute chief executive Ian McCaig.

“You don’t have enormous scale or specialism, so there was always going to be pressure. Economic conditions have really just accelerated that process in the case of XL.”

One XL pilot, who didn’t want to be named told the BBC that he was “completely shocked” when he heard the company had gone bust. He said he was only told the news this morning, and blamed fuel costs for the demise.

The group who last year carried 2.3 million passengers, and has 1,700 employees worldwide left this statement on its company website:

“The companies entered into administration having suffered as a result of volatile fuel prices, the economic downturn, and were unable to obtain further funding.”

Bob Atkinson, a spokesman from Travel Supermarket said XL’s demise would be a blow for the travel trade.

He said: “They are a very large operator and this will send serious shock waves through the industry.

“And what it’s going to do more than anything, it’s going to highlight how precarious the airline industry is at the moment.”