The classical definition is when its liabilities exceed its assets. However many businesses do trade on with the agreement of their banks should they feel the business is still capable of generating cash long term (short-term downturns would be such an occasion if it is felt the business is fundamentally healthy).
However if the credit runs short (at the banks or the suppliers) and the business find it cannot pay its bills then it's only a matter of time until it cannot buy the means to trade, and that's generally when the shutters come down.
That's why people really need to THINK about what they post in threads like this. Unsubstantiated rumours and speculation can affect the willingness of banks and suppliers to support airlines and become self-fulfilling prophecies. If MK are struggling at the moment (and let's face it aren't most airlines?) the last thing they need in their efforts to trade their way out of trouble is people pushing them downhill.