The Iraqi government is to close the Iraqi Airways after declaring it bankrupt.
The ministry of transportation said the state-owned airline would be closed following a dispute with Kuwait over war reparations.
Kuwait Airways says the Iraqi carrier owes it about $US1.2 billion for aircraft and plane parts taken during the Iraqi invasion of Kuwait in 1990.
The BBC reports all scheduled Iraqi Airways flights have been cancelled. They include weekly flights between Baghdad - London and flights from Baghdad to a number of other destinations in the Middle East, including Tehran, Damascus and Cairo.
The ministry blamed "harassment" from Kuwait for the airline's failure.
Last month, lawyers acting for Kuwaiti authorities tried to have an Iraqi Airlines plane confiscated while at London's Gatwick Airport. It had just arrived following the first direct flight between Baghdad - London for 20 years.
Earlier this week, Iraqi Airways said it would end flights to Europe and Sweden because of the efforts of Kuwait to retrieve compensation.