Spanair cancels all its flights and stops its activity for financial reasons

Due to the impossibility of finding extra capital, the Barcelona-based airline’s board has taken the decision to cancel all its flights and to suspend the company’s activity. Negotiations with Qatar Airways broke down, which forced Spanair’s board to analyse the company’s viability. The Catalan Government, which partially owns the airline, has refused to invest more money in the company, and thus Spanair stopped flying. Passengers will be refunded and will be able to buy discounted tickets with other airlines.

CNA / Gaspar Pericay Coll

January 28, 2012 12:31 AM

Barcelona (ACN).- Spanair announced on Friday evening the end of its activity and the cancellation of all its flights from 22.00 (CET) onwards. The Catalan airline has “indefinitely” stopped all its activity as a “precautionary and safety measure“ because they do not see “financial viability for the coming months”. Spanair has reached a critical financial situation after not finding additional capital to face its obligations and debts. On Friday, Qatar Airways refused to buy 49% of Spanair’s shares and the Catalan Government announced it would not provide further funding to the Barcelona-based airline. The Catalan Government and Barcelona’s City Council were part of the Catalan ownership of the company. Both institutions have given Spanair €150 million, through investments and loans, but no more money will be given to the airline, according to the Catalan Government. Late on Friday, Spanair’s board was still deciding how to allocate the affected passengers and how to meet its legal obligations towards workers and providers. Just this weekend 22,771 passengers will be affected (8,695 on the 91 flights scheduled for Saturday and 14,076 people on the 129 flights on Sunday). Passengers will be refunded and other airlines are offering seats at a especial low rate for Spanair passengers. A special space has been set aside at Barcelona El Prat Airport to inform affected passengers of their rights, although many have complained during the first hours about the situation, the queues and the lack of information they were receiving.

Spanair’s President, Ferran Soriano, said the first priority is to offer a solution to the affected passengers, and then study how to meet all their legal obligations towards workers and providers. Once these two points are clear, the company’s board will decide in the next hours if they will file for bankruptcy.

Bad news for Barcelona El Prat

Soriano also explained that the “end of the Spanair project” is “bad news” for Barcelona El Prat, as the Catalan airline was based at the airport and it aimed to create an intercontinental hub. This last objective was in fact what brought in the Catalan public institutions and the Catalan business community to invest in Spanair in 2009. Since the Spanish Government and Iberia did not prioritise Barcelona El Prat and they relegated it to a secondary position to benefit Madrid Barajas, there was a Catalan public-private initiative to own the majority of an airline, base it at Barcelona El Prat and build an intercontinental hub. After the plane accident Spanair had at Madrid Barajas and the will of SAS to sell many of its shares, the Catalan group of investors decided to buy Spanair.

Controversial loans

The airline was in a delicate financial situation, and the Catalan Government gave the company low-interest loans, funded with money from the Catalan Institute of Finances (ICF) (the Catalan Government’s body for institutional loans) and Barcelona City Council, which also owns some shares in the airline. They totalled €150 million. Other airlines, especially its competitors at Barcelona El Prat Airport Vueling and Ryanair, have criticised what they consider illegal public sector subsidies. Spanair and the Catalan Government have always justified these financial operations by considering them “investments”, comparable to those made by the Spanish or French Governments in Iberia or Air France. However, the concerns about the public money invested in Spanair reached Qatar Airways. In the face of the doubts and the lack of guarantees of not having to return the money, the Qatari company decided on Friday not to invest in Spanair. The same morning, the Catalan Ministers for Finance, Transport and Business met, and together with the President of the Catalan Government they agreed not to give any more money to Spanair. Some hour laters, the Catalan company confirmed the impossibility of finding additional capital, which forced the Catalan airline to stop flying.

Other airlines offer special rates to the affected passengers

Spanair passengers will be entirely refunded, although not immediately. Besides, Iberia, Vueling, and Air Europa will offer €60 flights within the Iberian Peninsula and to the Balearic Islands, €90 flights to the Canary Islands, and €100 flights abroad. These rates will be valid until Monday. However, the companies do not guarantee they will offer enough seats for all Spanair passengers. Ryanair also announced it will offer, “rescue rates” at €49 for Spanair passengers, available until February 4th and permitting them to fly until February 12th.