The collapse - the largest to hit a United Kingdom airline - has left some 300,000 future bookings cancelled and customers have been told to keep away from airports as there will be no more flights.
The government has asked the Civil Aviation Authority to charter more than 30 aircraft to bring home the estimated 110,000 customers who are now overseas.
Monarch is the largest airline in the United Kingdom to ever go into administration and the CAA says it is dealing with an "unprecedented situation".
Last year, Monarch required a 12-day extension before its ATOL was renewed by the CAA, with controlling shareholder Greybull Capital orchestrating a £165m rescue package.
Although Monarch's summer schedule ended this weekend, it was still due to carry sun-seekers heading to nine holiday resorts from Birmingham this morning.
If the licence is not renewed the airline, which carried six million passengers previous year, is likely to be placed in administration, which could lead to the cancellation of all its flights.
Describing it as a very hard day for employees, Grayling told BBC television that he had "already spoken to other airlines who think they are a first rate team of people working for Monarch and are looking to try and hire some of them". Together with the CAA, we will work around the clock to ensure Monarch passengers get the support they need.
"These new flights will be at no extra cost".
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The airline, founded in 1968, flies to over 40 destinations from five United Kingdom bases: London Gatwick, Birmingham, Manchester, Leeds-Bradford and Luton, where it is headquartered.
They CAA added in a statement: 'In line with our usual practice, we will not comment on the specifics of any Atol holder's application until such time as the process has reached a resolution'.
KPMG has been appointed as administrator to Monarch Airlines Limited and Monarch Travel Group Limited.
Monarch said on Thursday it was talking to potential partners after a report that parts of its short-haul network would be sold. This has resulted in management appointing us as administrators in the early hours of this morning.
An airport spokesman said: "Passengers who were planning to travel with Monarch should not travel to London Gatwick".
"Once the company entered insolvency, the Air Operating Certificate it needs to be able to fly was effectively suspended, which is why all outbound flights were cancelled with immediate effect", Nimmo says.
MRO units Monarch Aircraft Engineering and Monarch Ukraine are not in administration, however.