Scottish biggest airline, the Edinburgh-based Flyglobespan, has been placed in administration, with all scheduled flights cancelled.
PricewaterhouseCoopers has been appointed as administrator of the budget airline, which last year carried more than 1.5m passengers and operated 12,000 flights.
The move comes after attempts to find a new investor for the airline, which employs 800 staff, fell through yesterday afternoon.
The airline operated flights from Edinburgh, Glasgow and Aberdeen, as well as transatlantic flights from other UK hubs including Manchester, Gatwick and Belfast. It was due to start flights to Dubrovnik in May 2010 from its base at Aberdeen Airport.
Around 5,000 passengers had booked to travel with Flyglobespan in the coming days. Thousands more customers are on package holidays booked through the tour operator Globespan, part of the same group.
They are protected under the Air Travel Organisers' Licensing (Atol) scheme but airlines are not included in the arrangement.
A reported 27,000 passengers have future flights booked through the Atol insurance scheme, and around 90,000 have forward bookings but have no Atol protection.
Ryanair and easyJet will be both offering 'rescue' fares between Glasgow Prestwick and typical Flyglobespan destinations such as Tenerife, Alicante and Malaga.
Passengers were advised to call a helpline from 10am today and visit the website for further information in the meantime.
The call centre number is 0871 271 9000 for callers from the UK and +44 141 332 3233 for people calling from Europe.