The Swiss regional airline, Swisswings, suspended its activities on Monday, with the loss of 120 jobs in Bern and Geneva.
The company, based at Belp airport near Bern, has filed for creditor protection.
In a company statement, the airline said it was forced to suspend flights after the failure of last-ditch negotiations on Friday with a "last chance partner" to secure SFr10 million to cover its operating costs.
"The board has done everything in its powers to keep the company afloat in the last few years," said the statement. "But it was left with no choice but to suspend operations after Friday's final attempts to save the company."
Swisswings, previously known as Air Engiadina, said it was putting together a social package for its employees, who will be paid until the end of April.
Swiss helps out
The new national carrier, Swiss, said on Monday it would fly Swisswings passengers free of charge on Monday. Swiss added that it would carry Swisswings passengers until Thursday in exchange for a financial contribution towards its operating costs of up to SFr400 for a return flight.
Swiss said it would also try to guarantee replacement flights for passengers booked on Swisswings charter flights, departing from Bern or Geneva.
KLM said it would fly passengers bound for Amsterdam, in exchange for compensation, also until Thursday.
Swisswings said it was still in talks regarding flights after April 9, 2002.
swissinfo with agencies