Thames Valley Police have confirmed they are to launch a fraud probe into the Varsity Express airline following its collapse last week.

The venture – which offered passengers flights between Edinburgh and Glasgow – collapsed after just one week, with allegations from customers over financial irregularities.

Established by Martin Halstead – the entrepreneur behind the failed Alpha One Airline – Varsity Express flew its first passengers on March 1st, but collapsed just days later, leaving some passengers stranded in Edinburgh.

Following complaints police have now stepped in to investigate.

Mr Halstead – who acquired the moniker Baby Branson during publicity for his first airline - had previously admitted creating bogus financial backers for his latest venture, but denies fraud or any criminal wrongdoing.

Allegations also suggest Mr Halstead invented the character Will Gilligan to act as finance director for the company while soliciting investments.

Varsity Express has vowed to refund between 400 and 450 passengers who have bookings with the airline. However, no time frame has been offered to customers.

Explaining the situation earlier today Mr Halstead said: “I have certainly never acted fraudulently and I don’t think anyone within my company has.

“I have protected the interests of our passengers and am making sure they get their money back. It’s an incredibly unfortunate set of circumstances.

“I have tried to act as responsibly as possible so passengers’ money is not being used at all until flights have flown.

“The Will Gilligan thing is a bone of contention but I don’t think anyone’s acted illegally.

“He (Gilligan) was never a director of the company at all just an email address to keep me out of the public eye initially. It was never the intention for me to be the public face of the company because it would dent the credibility of the company off the back of Alpha One.

“There’s nothing illegal about using a pseudonym.

“I went along with it. I never saw it as an issue because Will Gilligan was never actually conducting any business for the company.”

The football club Oxford United is also claiming compensation from Mr Halstead, after the airline rented two advertising hoardings at the club’s ground.

A statement on the Varsity website reads: “The reason the suspension is due to operational issues between Varsity Air Services and the airline and AOC holder who have been contracted to operate the Jetstream 31 type on our behalf and that was being used on the route.

“All further ticket sales have been suspended until further notice. All passengers affected by the suspension of service either have been or are currently being informed of the situation.”