Spanair halts flights after Government lifeline runs out and Qatar Airways pulls out

Spanair was hoping that Qatar Airways would buy it, but take over talks ended and the Spanish regional government refused to provide more funding. The airline may now file for bankruptcy and stopped all its operations,  with around 20,000 passengers left stranded. The airline is based in Catalonia, one of the most indebted regions in Spain, and Spain’s regions are slashing spending to cut debt as the country grapples with the euro area’s 3rd-largest budget deficit. Spanair, founded in 1986, operated from 15 Spanish airports and had routes to Europe, Africa and the Middle East.

January 29, 2012  (Bloomberg)

By Manuel Baigorri

Jan. 28 (Bloomberg) — Spanair SA, the Spanish airline involved in a crash that killed 154 people in 2008, ceased operations after Qatar Airways Ltd. halted takeover talks and the regional government refused to provide further financing.

The final flight landed at about 10 p.m. yesterday, closely-held Spanair said in an e-mailed statement late yesterday. It cited “a lack of financial visibility for the coming months.” The Barcelona-based company wouldn’t confirm a statement made by former owner SAS AB that it had filed for bankruptcy.

“We were in a very advanced process of finding a financial partner, but we were notified by the regional government that it couldn’t finance our operations anymore and that Qatar wouldn’t invest in Spanair,” Chairman Ferran Soriano said in a televised interview with state-owned TVE. Closing operations was “the most prudent and safe” decision, he said.

The government of Catalonia, Spain’s largest and second- most indebted region, said yesterday it can’t afford to continue funding the company as the economic crisis continues. Plans to find an industrial partner for the airline failed after the talks with Qatar Airways failed, it said. Spain’s regions are slashing spending to cut debt as the country grapples with the euro area’s third-largest budget deficit.

23,000 Passengers

Spanair’s closure affects almost 23,000 passengers this weekend and involves the cancellation of 120 flights, spokeswoman Sandra Melendez said by phone today. The company has more than 2,000 employees, she said.

Iberia, the Spanish unit of International Consolidated Airlines Group SA, is offering special fares to Spanair passengers, it said last night. Vueling Airlines SA and Air Europa are also providing reduced fares, Melendez said.

The company is legally obliged to take care of passengers affected by the closure and needs to produce a plan to help them, Spain’s development ministry said in a statement yesterday. The development ministry will open an investigation and ask the airline to compensate passengers for the damage caused, Deputy Minister Rafael Catala said in a TVE interview.

The airline could be fined about 9 million euros ($11.9 million), Development Minister Ana Pastor said today, according to TVE.

“The airline industry has become a game of big players and Spanair was tremendously weak,” Francisco Salvador, a Madrid-based strategist at FGA/MG Valores, said today by telephone. “Tough competition from carriers such as Vueling Airlines or Ryanair and the Spanish economic crisis didn’t help either.”

SAS Write Down

Spanair, founded in 1986, operated from 15 Spanish airports and had routes to Europe, Africa and the Middle East.   SAS, which sold 80% of the airline in March 2009 to a group of investors and now holds about 11%, said in a statement it would write down the value of its remaining stake by 1.7 billion Swedish kronor ($252 million).

The Spanish airline is considering solutions “including seeking protection from creditors or filing for bankruptcy,” though no decision has been made, Melendez said.

“Spanair should have merged with another airline as its airplanes were too old and its brand image was completely destroyed after the crash,” Salvador said. “This will be a respite for Iberia and Vueling as they will gain market share and avoid competition from Spanair’s price-aggressive strategy.”

–Editors: Ross Larsen, Alastair Reed.

Comment from an AirportWatch member:

It appears that it had enjoyed financial support to the tune of 115M euros (illegal subsidy?) from the regional government of Catalonia: its advice to travellers left with paid-for tickets for flights yet to be flown is “if you paid in cash or by bank transfer, IATA may be able to help; if by credit-card, contact the card issuer”.
That seems to me like “the general public pays not only to subsidise the start-up but also to clean up the mess when it fails”.
Is this any way to run an industry?


see also

29.1.2012  (Av Stop)

Spanair Files For Bankruptcy After Qatar Airways Pulls Out Of Rescue DealBy Shane Nolan
January 29, 2012 – Spanair’s Board of Directors on Friday decided to file for bankruptcy. On Wednesday, the company was in an “Emergency Financial Situation.” The Catalonian government approved a €10.5 million loan plan in order to save it. Revenue improved and the company was cutting costs.However on Friday, the airline ceased operations after a rescue deal with Qatar Airways fell through and the government has declined to inject further cash into the airline.Spanair is a Spanish airline, with its head office in the Spanair Building in L’Hospitalet de Llobregat, near Barcelona. It was, until 2009, a subsidiary of Scandinavian Airlines, which held slightly under 20% of the company.
Spanair provided a scheduled passenger network within Spain and Europe, with an extension to West Africa. Worldwide charters were also flown for tour companies. Its main hub was Barcelona El Prat Airport, with focus cities at Madrid-Barajas Airport and Palma de Mallorca Airport. The airline had 3,161 employees.SAS ownership in Spanair is currently 10,9%, but the value of these shares has already been written down and are booked at 0 value. The write down will affect the SAS Group’s result as a non-recurring item and equity negatively by SEK 1.7 billion in total. As informed earlier, the effect on the SAS Group’s liquid assets is estimated to be limited to MSEK 200-300.SAS Group will follow customary procedures as a creditor in the upcoming bankruptcy process. As reported as of the third quarter, SAS has a financial preparedness of SEK 10.6 billion so the event will have a limited effect on SAS liquidity. SAS will assist passengers to the extent practically possible.The airline was established in December 1986 and began operations in March 1988. It was set up as a joint venture between Scandinavian Airlines and Viajes Marsans, and began operations with European charters. Long-haul flights to the United States, Mexico and the Dominican Republic were launched in 1991, followed by domestic scheduled flights in March 1994. The airline flew long-haul flights with Boeing 767-300ER aircraft to Washington and Buenos Aires in the late 1990s. Spanair joined Star Alliance on 1 May 2003.
The company was 94% owned by the SAS Group. SAS announced in a press release 13 June 2007 that it would sell its shares in Spanair. The divestment was canceled on 19 June 2008 due to SAS not being able to sell for a price that it considered to “reflect the underlying value in Spanair.” On 30 January 2009, however, a one euro bid from group of investors from Catalonia, led by the Consorci de Turisme de Barcelona and Catalana d’Inciatives, was later accepted, whereupon SAS became a minority shareholder.
A report in The Times on the day of the Madrid crash suggests that staff were threatening strike action due to concerns about the company’s viability. In 2009 the airline asked for public input on a new logo, with a winner being officially confirmed on 13 May 2009. In the beginning of June 2009, Spanair began applying the new corporate identity to their aircraft.

Another airline filing for bankruptcy recenty (November 2011) was American Airlines.