Scotland's largest airline, Flyglobespan, has gone into administration with the loss of around 800 jobs.
Around 5,000 passengers are expecting to travel to and from foreign destinations with the airline during the coming days. Customers booked to fly on Thursday are advised to stay at home or make alternative plans.
Bruce Cartwright of PricewaterhouseCoopers in Scotland, who has been appointed administrator for the Edinburgh-based company, said: "Our focus right now is on assisting those passengers who need to complete return journeys and communicating with those who have future reservations.
"We would strongly advise those passengers who had expected to travel tomorrow to remain at home or make alternative arrangements as there is no prospect of their planned flight taking place."
The airline operates flights from Edinburgh, Glasgow and Aberdeen as well as transatlantic flights from other UK hubs including Manchester, Gatwick and Belfast.
The company, which began its flight services in 2002 after trading as a tour operator for over 30 years, mainly operates from Scottish airports to destinations including Europe and Orlando in the US.
Flyglobespan's announcement follows attempts to finalise a deal for the airline with Jersey-based Halcyon Investments which broke down on Wednesday.
Mr Cartwright added: "Despite difficult trading conditions, the company has successfully implemented a number of steps to refine operations and focus on core profitable business.
"Unfortunately a lack of confidence in the sector following the demise of other airlines resulted in a reduction of liquidity to fund the ongoing operations. The directors have sought to overcome this lack of liquidity by seeking additional funding from a third party in recent weeks but this has ultimately been unsuccessful.
"The directors have therefore concluded with regret that the business can no longer continue to operate."
He said: "We are acutely aware of the distress this situation will cause those travellers who are currently abroad, as well as the impact on those holidaymakers who have booked travel for later this year or 2010.
"Over the coming days we will be focusing our efforts on ensuring Globespan customers have all the information they require to both return home or to determine the next steps in terms of whether or not they can secure refunds."
The Civil Aviation Authority (CAA) understands there are 3,400 Flyglobespan customers currently abroad at various locations who will need to make their own arrangements to return home using alternative airlines. They are not protected as they booked directly with flyglobespan.com.
CAA said it would be responsible for the return of about 1,100 people who are on holidays booked as part of a Globespan package holiday.
There are also 27,000 customers who have flights already booked through the ATOL insurance scheme, and an estimated 90,000 who have future bookings but have no ATOL protection.
On their website the airline is advertising Christmas and New Year flights to a range of destinations including Tenerife, Faro, Sharm el Sheikh, Palma and Madeira from Glasgow, Edinburgh and Aberdeen airports.
Flyglobespan won the award for Best Holiday Airline at this year’s Scottish Passenger Agents Association Awards and shortlisted in the Best Charter Airline category at the Travel Weekly Globe Awards.
Flyglobespan is a subsidiary of The Globespan Group, and is run by Tom Dalrymple, one of the wealthiest men in Scotland.
Labour MP for Edinburgh North Leith Mark Lazarowicz said: "This is a hugely worrying announcement for the 600 staff and all their families who will be desperately concerned.
"It will potentially be a massive problem to those who have booked their Christmas holidays with the airline, or who are overseas now."
Other airlines, including Ryanair and Easyjet have offered help to stranded Flyglobespan customers.
Flyglobespan passengers are advised to call a helpline from 10am on Thursday and visit the website for further information in the meantime. The call centre number is 0871 271 9000 for UK calls and +44 141 332 3233 for people calling from Europe.
