TUI AG (LSE:TUI), formerly known as Thompson, has cancelled 43 flights a week in June from Manchester Airport in a move expected to affect up to 37,000 passengers.
It is the latest airline to cut scheduled flights this week, sparking chaos at airports during the half-term getaway.
TUI said the problem was specific to Manchester and flights from other airports would continue as normal.
A spokesperson said: “We would like to apologise to our customers who have experienced flight delays and cancellations in recent days and understand that many of our customers have been looking forward to their holiday with us for a long time.
“Customers affected by the flight cancellations will receive a full refund for their holiday, as well as an extra gesture of goodwill.”
TUI’s is another black mark on a week of misery for travellers looking to fly out of the UK with long queues at the check-ins at Bristol, Birmingham and Gatwick as well as Manchester.
A spokesman for Manchester Airport said: “Over the last few days Tui and its appointed ground handler, Swissport, have experienced significant challenges with their check-in and baggage reclaim operations at Manchester Airport.
“From extensive discussions with the Tui and Swissport management teams, it is clear that they are experiencing temporary staff shortages, in common with other aviation and travel companies.”
On Tuesday, lines of people waiting were again forming out of terminal buildings at regional airports as bosses blamed staff shortages.
Lord Parkinson, the arts minister, claimed the travel industry had months to prepare for the half-term chaos and should have had the necessary staff ready.
Parkinson said: "We have been on a long pathway back to recovery so that people can enjoy this moment and [companies] should be making sure that people are able to get away on holiday and enjoy it fully.
"We have been, for many months, urging them to make sure they've got enough staff."
He went on to add that there are "lots of opinionated people in the aviation industry," which Sky News interpreted as airline bosses, who have long blamed the government for shortages and cancellations.
EasyJet and British Airways have both also cancelled services this week, adding to a problem that has been running for weeks.
Budget carrier easyJet has scrapped more than 200 flights due to a combination of staff shortages and IT problems while BA is grounding over 100 scheduled take-offs a day.
Shares in TUI dropped 2.4% to 192.3p, BA owner IAG by 4.3% to 129.2p and easyJet by 3.9% to 514.6p, with a surge in the price of crude adding to investors' nervousness about the sector.