Monarch Airlines is in emergency talks to renew its licence to sell package holidays, it is understood.
It has until midnight on 30 September to reach an agreement to temporarily extend its ATOL licence with the Civil Aviation Authority.
The company faced similar difficulties in 2016, when it was reported to be in poor financial health.
If talks fail, 10,000 of its passengers currently abroad could face uncertainty over their travel plans.
Flight-only bookings would not be affected as they do not fall under the licence.
A loss of the licence would mean that Monarch’s package holiday business could be placed in administration within days. The CAA is thought to be drawing up contingency plans to fly stranded passengers home.
In a statement Monarch said: “As previously stated, we continue to work on plans to determine our optimal future shape, size and strategy.
“Our flights are operating as normal, carrying Monarch customers as scheduled.”
The airline is also understood to be in talks to sell part or all of its short-haul operation. It flew 6.3m customers last year – of which around 100,000 were package holidays covered by the Atol guarantee.
The company has already said it is moving into the long haul business and has ordered 45 Boeing aircraft, which will start to be delivered from March next year.