British travel group Thomas Cook on Monday declared bankruptcy after failing to reach a last-ditch rescue deal, triggering the UK's biggest repatriation since World War II to bring back stranded passengers.
The 178-year-old operator had been desperately seeking £200m ($250m) from private investors to save it from collapse.
"Despite considerable efforts, those discussions have not resulted in agreement between the company's stakeholders and proposed new money providers," Thomas Cook said in a statement.
"The company's board has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect."
The government said it had hired planes to fly home an estimated 150 000 holidaymakers to the UK, in an operation starting on Monday.
'Deeply sad day'
"Following the collapse of Thomas Cook and the cancellation of all its flights, Transport Secretary Grant Shapps has announced that the government and UK Civil Aviation Authority has hired dozens of charter planes to fly customers home free of charge," a separate statement said, describing it as the largest repatriation in peacetime history.
"All customers currently abroad with Thomas Cook who are booked to return to the UK over the next two weeks will be brought home as close as possible to their booked return date."
Thomas Cook chief executive Peter Fankhauser called it a "deeply sad day".
"It is a matter of profound regret to me and the rest of the board that we were not successful," he said.
"This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world," he added in the group's statement.
The firm's creditors held a marathon meeting on Sunday to try and work out a deal, followed by a meeting of the board of directors.
Reports said a collapse of the group would mean the repatriation of 600 000 tourists, including around 150 000 seeking government help returning to the UK.
Two years ago, the collapse of Monarch Airlines prompted the British government to take emergency action to return 110 000 stranded passengers, costing taxpayers some £60m on hiring planes.
As well as the grounding of its planes, Thomas Cook has been forced to shut travel agencies, leaving the group's 22 000 global employees – 9 000 of whom are in Britain - out of a job.