More than 300 employees of budget carrier Bonza have been stood down as the government leaves the financially floundering airline without a life raft.

Thousands of passengers were stranded around Australia when Bonza flights were cancelled on Tuesday morning with little notice.

Many of those stranded had been allowed to buy tickets after the company was warned it would be forced to ground its planes.

Administrator Hall Chadwick revealed default notices were issued to the airline on April 17, almost two weeks before customers were left scrambling to secure alternative flights.

Bonza leased its entire fleet of Boeing 737-8 planes and those agreements were terminated late on Monday night.

Company directors claimed action taken by lessors that forced them to ground flights was “not foreshadowed or expected”, Hall Chadwick said in a statement.

Insufficient cash flow and funding was preventing Bonza from continuing to operate, the administrator said.

In a further update late on Friday, Hall Chadwick confirmed 302 workers had been stood down out of a total workforce of 323 people.

They were informed during a virtual meeting on Thursday evening.

The administrators were in discussions with government organisations in regards to employee assistance, they said.

Federal Transport Minister Catherine King earlier ruled out providing financial assistance to Bonza, saying the government’s priority was ensuring stranded travellers could make it home.

But cabinet colleague Bill Shorten later said the government would arrange transition support to ensure employees received the wages they were owed if administrators could not pay their entitlements.

“It’s a terrible time for these workers, unfortunately,” he told ABC Radio.

“As a union rep, I went through the collapse of Ansett and I saw what happened with Virgin.”

All planes have been grounded until at least Wednesday, five days more than previously expected.

Passengers with upcoming flights have been told not to travel to an airport unless they have secured a seat with a different airline.

“The administrators appreciate this is not the news that the employees, customers, and other key stakeholders would like to hear, however there is no alternative course of action available to the administrators at this point in time,” Hall Chadwick said.

Transport Workers Union official Emily McMillan called on Bonza to “strain every sinew” to ensure workers were paid.

“These are hardworking people with bills to pay and families to feed,” she said.

“This is a devastating blow and a cause for great worry in a cost-of-living crisis.”

Refunds are not being processed and customers have been told to contact their bank or travel insurance provider.

The Sunshine Coast-based company was unveiled in October 2021 and its first flight took off in January 2023.

It originally flew 27 routes to 17 destinations but started cutting services during its first six months.

The collapse of Bonza is another blow to hopes of increasing competition, and thereby affordability, in Australia’s highly concentrated aviation sector.

Qantas, its subsidiary Jetstar and rival Virgin fly almost 95 per cent of all domestic passengers.

By way of comparison, Woolworths and Coles, which have been the focus of multiple inquiries into concentration in the supermarket sector, control about 65 per cent of that market.

The transport minister said the government was committed to growing competition, reliability and affordability in the aviation industry.

“In recent years it is clear the sector has not met the expectations of Australian travellers,” a spokesperson told AAP.

She said recent changes to slot availability at Sydney airport helped increase competition and further measures would be unveiled in the Aviation White Paper, expected to be released in mid-2024.

—AAP