Loss-making airline airBerlin is seeking protection from its creditors and has launched insolvency proceedings.
However, the carrier said it wants to remain in operation following a government bailout.
The decision comes after Etihad Airways, which owns 29 per cent of the carrier, withdrew financial support.
In a statement Etihad Airways explained: “This development is extremely disappointing for all parties, especially as Etihad has provided extensive support to airberlin for its previous liquidity challenges and restructuring efforts over the past six years.
“In April this year, Etihad provided €250 million of additional funding to airberlin as well as supporting the airline to explore strategic options for the business.
“However, airberlin’s business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions.
“Under these circumstances, as a minority shareholder, Etihad cannot offer funding that would further increase our financial exposure.
A bridging loan has been agreed with authorities in order to keep planes in the air in the short term.
The loan, of €150 million, will be made available via the German government-owned KfW Development Bank.
Thomas Winkelmann, chief executive, airberlin: “We are working tirelessly to achieve the best possible outcome for the company, our customers and employees, given the situation.”
Insolvency proceedings were launched earlier at the local court in Berlin-Charlottenburg.
Germany flag-carrier Lufthansa is in negotiations with airberlin to take-over parts of the airberlin Group and is exploring the possibility of hiring additional staff.
Lufthansa is also keen to ensure that all aircraft that are currently operated by airBerlin under a wet lease agreement from Eurowings and Austrian Airlines will continue to operate as before.
airBerlin said it would not seek bankruptcy protection for its Niki Luftfahrt and Leisure Cargo units.
Low-cost carrier airberlin focuses on domestic flights within Germany and on services between a number of major European cities and its Berlin-Tegel and Dusseldorf hubs.
It operates long-haul flights to the US, Caribbean and the Middle East.
airberlin carried approximately 28.9 million passengers in 2016.
The carrier is a member of the oneworld alliance.