Air Berlin, Germany's second-largest carrier, has filed for insolvency, after its main shareholder Etihad declared it would not be providing further financial support.
The airline, which has accumulated debt for almost a decade, reported a record loss of 782m euros (£713m) in 2016.
Flights will continue to operate thanks to a transitional loan of 150m euros from the German government.
Its main rival, Lufthansa, is in talks to buy part of the Air Berlin Group.
Air Berlin's passenger numbers have been in freefall: in July, the airline lost a quarter of its customers compared with the previous year.
The carrier has also been plagued by delays and cancellations, for which it has been forced to pay millions of euros in compensation.
At a news conference, Germany's Economy Minister, Brigitte Zypries, said the government's emergency loan should allow flights at the airline to continue for three months.
Flights at Air Berlin's low-cost subsidiary airline Niki are also continuing as normal.
Ms Zypries said discussions between Air Berlin and Lufthansa were going well, and a deal whereby Lufthansa takes over part of the insolvent airline should be struck in the next few months.