New Delhi, May 3 -- Spirit Airlines has ceased all operations, grounding every flight and shutting its customer service lines, leaving passengers who had booked travel with the carrier in a deeply uncertain position. The airline's collapse marks the largest failure of a US carrier in years, and unlike a standard cancellation, there is no single set of rules governing what happens next.

Spirit had filed for bankruptcy protection for the second time in a year as recently as August, and its leadership had quietly prepared a contingency plan -- referred to internally as "Plan Charlie" -- in the event that a financial rescue could not be secured. That worst-case scenario has now come to pass.

Negotiations between the airline's bondholders an...