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The UK's third largest package holiday operater, XL Leisure, has called in administrators, potentially leaving tens of thousands of holidaymakers stranded abroad.

The organisation, which also operates XL Airways, cited "volatile fuel prices" and the "economic downturn" as the catalyst for the failure, stating they "were unable to obtain further funding".

XL failed to agree a multi-million pound rescue package with creditors, resulting in administrators being called in at 03:00 BST this morning.

However, the French and German divisions of XL continue to trade as usual.

As a result of the British collapse all flights between the airlines 50 plus destinations have been cancelled, and all planes grounded.

The Civil Aviation Authority (CAA) confirmed 85,000 people could be stranded abroad, while 200,000 travellers have made advance bookings with the company

"In respect of people who are currently abroad we're making arrangements and working very closely with the travel industry to organise repatriation flights," explained David Clover, a spokesman for the CAA in a statement.

"Clearly though, with XL Airways no longer operating, we are having to bring in substitute aircraft to bring people home."

XL Leisure trades under a host of brand names, including: XL Airways UK, Excel Aviation, Explorer House, Aspire Holidays, Freedom Flights, Freedom Flights (Aviation), The Really Great Holiday Company, Medlife Hotels, Travel City Flights, Kosmar Villa Holidays – all of which are now in administration.

The CAA confirmed package deals were covered by the Air Travel Organisers' Licensing ATOL scheme, which would see holiday makers presently abroad offered repatriation flights, and those with advanced bookings offered a refund.

Those with future flights are also urged to check insurance policies and with their banks or credit card companies about refunds.

Oil prices have hit $147 a barrel in recent months, but have since fallen back below the psychologically important $100 a barrel mark, forcing up fuel costs at taking a toll on all airlines.