Spanair has left more than 20,000 passengers stranded after running out of financing options. The Barcelona-based airline has ceased operations leading to 647 flight cancellations. UK low cost airlines, EasyJet and Ryanair are both offering options to passengers hit by the collapse. Spanair said it is also working with Vueling, Iberia & Air Europa to find alternatives for passengers.

The airline said it was finalizing an agreement with IATA to get refunds for those with tickets that had yet to travel.

A statement on the airline’s website advised customers with reservations to contact their credit card company, insurance company or travel agency.

"Due to these exceptional circumstances all our flights are cancelled," the statement said.

Spanair made the decision to halt operations after learning they would not receive government backed loans and talks fell through with Qatar Airways about potentially taking a stake in Spanair.

The collapse of a scheduled carrier has led to suggestions that Europe's debt crisis may spark airlines from the Mediterranean to the Baltic to consider mergers or risk failure.

SAS Group issued a statement this weekend saying that Spanair’s board of directors had decided to apply for bankruptcy.

SAS divested most of its ownership in Spanair in early 2009, but it had a remaining exposure of about 1.8 billion Swedish krona leading the airline to issue profit warning.


"SAS Group will follow customary procedures as a creditor in the upcoming bankruptcy process," it said.

Spanair, a Star Alliance airline, issued a statement almost exactly a year ago warning that it was in an emergency financial situation. The airline was still recovering after an air crash in 2008 which killed 154 people.

The Spanish government says it is taking legal action against Spanair, which could result in a fine of 9million euros, for suspending its flights without proper warning.