France's second-biggest airline, Air Lib, stopped flying yes-terday, stranding thousands of passengers but opening up the possibility of cheaper flights to Paris from London and other European capitals.

Desperate attempts were being made to save Air Lib from liquidation but the debt-ridden airline seemed to have reached the end of the journey. A Dutch company, ICMA, had offered to refloat it but withdrew after the French government refused to intervene to persuade Airbus to provide 30 new A-319 aircraft, on credit, at bargain prices.

Some of Air Lib's 3,200 employees blocked access roads to Orly airport, near Paris, yesterday, accusing the government of throwing them out of work. There were angry scenes at airports in Corsica, the French West Indies and many French regional cities as passengers found Air Lib desks deserted and no way to exchange or cash in tickets.

The French government refused to renew the airline's flying licence after the collapse of negotiations with IMCA to find ways of paying off Air Lib's €100m (£66m) in debt, which is mostly owed to the government. Jean-Charles Corbet, the airline's president, insisted that bankruptcy was not inevitable and that talks with IMCA could continue. He called on President Jacques Chirac to intervene.

Government officials made clear that they believed hopes of saving Air Lib – and the 15-year-old dream of creating a second French airline to rival the state-owned Air France – were over.

A number of cut-price airlines in other European countries, including easyJet and Ryanair, have been waiting impatiently for the end of the Air Lib saga. The demise of the airline would free up to 50,000 precious landing and take-off "slots" a year at Orly airport alone and more than 20,000 at Charles de Gaulle airport, north of Paris.

EasyJet in particular is keen to take up to 20,000 slots a year at Orly, allowing it to fly to London, French provincial cities and other capitals.

Although the French government would prefer to avoid further competition for Air France, it might now be bound, under EU laws on open transport markets, to allow Air Lib's Paris slots to go to foreign competitors.