Cyprus airline Cobalt Air ceased operating just before midnight on Wednesday after failing to secure an injection of funds from its principal Chinese shareholder, Avic Joy Air.

The Cyprus government confirmed it would cover the cost of repatriating Cobalt Air passengers left stranded so long as they return by October 24.

Transport minister Vasiliki Anastasiadou said: “Our aim is for everyone to return home.”

The minister said Cyprus would cover the cost of one-way tickets for passengers, but not accommodation costs.

She said: “We feel the need to help passengers, either stranded in Cyprus or abroad, to return to their place of residence.”

Two Cyprus tour operators, Top Kinisis and Orthodoxou Travel, were assisting the repatriation by arranging flights.

Both the number of stranded passengers and the number of forward bookings remained undisclosed at the end of this week, but Cobalt Air operated 18 flights a day with about 2,500 passengers daily.

The Bank of Cyprus announced that all customers who booked Cobalt Air flights with its cards would be refunded.

Cobalt Air, based in Larnaca, began flying in 2016 after stepping into the niche left by Cyprus Airways which ceased operating a year earlier.

The carrier’s board has proposed its operating licence be suspended only temporarily by the Cyprus aviation authority while Cobalt directors seek new investment.

Airline board member Grigoris Diakos confirmed the airline sought a temporary suspension to “give us time to seek another investor”.

But he acknowledged: “If all the licences are cancelled then no new investor will show any interest.”

The airline appears to have fallen foul of increasing Chinese government constraints on overseas investments by Chinese companies.

Diakos said Cobalt’s Chinese shareholder had decided it could no longer continue funding Cobalt “for its own reasons”.

He said: “[In] the last few weeks an effort was underway to find a new investor. After yesterday [Wednesday], which we said would be the last day to reach the decision, we took a decision that was very painful.”

However, transport minister Anastasiadou said: “If Cobalt had not announced it, we would have done so because we had given them a deadline to submit a financial statement.”

Anastasiadou said the airline had been called before the licensing authority repeatedly in recent days to provide information on its financial situation.

She said: “The company had asked us for time to find funding to tackle its financial problems.”

Anastasiadou added that the company had asked the finance ministry for assistance but was told this would violate EU law.

Cobalt Air had 280 employees. Diakos said: “We feel great responsibility toward our staff. They are people who experienced the same with Cyprus Airways.”

The airline hired large numbers of workers who had worked for Cyprus Airways, the state-owned carrier which ceased flying in January 2015 after the EC ruled the carrier must repay up to €100 million received in state aid.

Many of these workers had moved to the Gulf but seized the chance to return home to work.

Cobalt had become the largest Cyprus-based airline, operating six aircraft and flying to 23 destinations including London’s Heathrow, Gatwick and Stansted, Paris Orly, Beirut and Tel Aviv.

Cyprus media reported rumours began circulating about the carrier’s cash-flow in early October when two aircraft were grounded for two days following a delay in payment of a monthly leasing fee.

The airline was founded by aviation industry veteran and former Qantas pilot Guy Maclean and ex-Cyprus Airways chief pilot Petros Souppouris in 2015.

They won backing from a consortium of Cypriot and other EU shareholders but required the support of a 49% stake taken by AJ Cyprus – the Cyprus-registered arm of Avic Joy Air.

The Aviation Industry Corporation of China (Avic) is a state-owned aircraft manufacturer. Joy Air is a Chinese airline based in the city of Xi’an, in northwest China, which was launched jointly by China Eastern Airlines and Avic in 2009.

Avic Joy Holdings is a Hong Kong-registered company with investments not just in aviation but in natural gas, construction and property.