Hungary's national airline has ceased operations and grounded all its flights in response to an "unsustainable" financial situation.

Malev, which is a member of the Oneworld airline alliance that also includes American Airlines and British Airways, has debts of around 60 billion forints (£170 million) and has been unable to find new investors.

The airline, which was established in 1946, the year after the end of the Second World War, stopped all its flights as of 5am on Friday.

Managing director Lorant Limburger said in the past days partner airlines had suddenly lost trust in Malev and started demanding advance payments for their services. "This accelerated the cash outflow to such an extent that by today (Friday) the airline's situation has become unsustainable," he said in a statement. "We apologise to all our passengers."

Prime minister Viktor Orban said on state radio that two Malev planes were still abroad - in Tel Aviv and Ireland. Those planes were not allowed to take off because of the airline's accumulated debts, he said. Mr Orban added that Malev faced the risk of having more of its 22 planes seized by creditors if it were to continue operations.

Last month, the European Union ordered Malev to repay nearly £252 million in illegal state subsidies received between 2007 and 2010. In 2010, Malev's losses reached £69 million.

"It is a painful thing. We tried to keep Malev on track as long as we could, but this is as far as we could go," Mr Orban said, adding that he was still hopeful that new investors could be found despite Europe's ongoing debt crisis.

"I believe a restart is not impossible," he said.

Earlier this week, Malev began operating under what amounted to bankruptcy protection and a receiver was appointed by the government to oversee the airline.

Malev has 2,600 employees. After several failed privatisation efforts over the past 20 years, the state now owns 95% of the company. A deal to sell a stake in Malev to China's Hainan Airlines fell through last year.