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Spanair is facing legal action after it ceased operations

Spanair faces legal action since it ceased operations

Spain's government has launched legal action against the now-defunct airline Spanair for allegedly violating the country's aviation regulations by suddenly ceasing operations.
Spain's government has launched legal action against the now-defunct airline Spanair for allegedly violating the country's aviation regulations by suddenly ceasing operations.

An estimated 22,000 passengers who had booked seats on more than 220 cancelled flights have been left looking for alternative arrangements after Spanair, owned by a consortium based in the north-eastern region of Catalonia, shut down its operations late on Friday because of a lack of funding.

The legal proceedings begun by Spain's government could lead to Spanair being fined 9 million euro (£7.5 million) for two "serious infringements" of aviation security legislation, development minister Ana Pastor said. The alleged infractions related to obligations linked to continued service and passenger protection.

Chairman Ferran Soriano said the airline had failed to attract inward investment and consequently the regional government of north-eastern Catalonia took the decision to stop providing funds. Spanair, whose hub was Barcelona airport, employed around 2,000 people and used the services of about 1,200 ground staff.

Spanair's financial woes were exacerbated by a 2008 crash that killed 154 people. Eighteen people survived what was Spain's worst aviation disaster in 25 years. The airline, which also ran a commuter service between Madrid and Barcelona, was in trouble financially before Spanair Flight JK5022 - an MD-82 jet - crashed on take-off on August 20, 2008 as it tried to leave Madrid bound for the Canary Islands.

In 2010, Spanair reported an operating loss of 115 million euro (£96 million) and had survived thanks to finance provided by the Catalan government and some private investors.

The Catalan government cited the "current economic climate" and "European legislation concerning competition" as the major factors influencing its decision.

In Brussels, the European Low Fares Airline Association said those of its members flying overlapping routes with Spanair would offer specially discounted fares to enable stranded passengers to return home. Offers are subject to seat availability, said the organisation of budget airlines - which includes Ryanair and EasyJet.

The association's secretary-general, John Hanlon, said in a statement the aim was to assist Spanair passengers who were experiencing difficulties with travel plans. National carrier Iberia Spanish Airlines SA said it had also offered to help.

It is not known if any British passengers are affected.

 


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Pressure grows on EU leaders to relax austerity

Spain is on course for another recession after GDP contracted 0.3% at the end of last year, while the cost of insuring Portuguese debt has hit a new record

Spanish PM Mariano Rajoy held talks with European commission president José Manuel Barroso
Pressure on EU leaders to relax their insistence on strict austerity measures intensified on Monday after Spain revealed that its economy contracted in the last three months of 2011 and the cost of insuring Portugal's debt soared to a record high.

Spain's output dropped by 0.3% during the fourth quarter of 2011 compared with the previous three months, according to official data, confirming the view of the prime minister, Mariano Rajoy, that the economy is sliding into recession.

The figures followed unemployment data last week that shocked EU politicians after it revealed a 350,000 rise in the total out of work, taking the jobless rate to 22.8% and above 5 million.

Madrid said it wanted officials in Brussels to discuss how countries such as Spain can grow before any agreements are reached on further austerity measures.

The economy is expected to slide further in the first quarter of this year, placing Spain in its second recession in less than three years. A technical recession is defined as two consecutive quarters of contraction.

The figure announced by the Spanish statistical office, INE, broke a run of seven quarters without economic contraction.

Compared with a year earlier, gross domestic product rose 0.3%, the INE said. For all of 2011, it increased 0.7%.

Portugal's slide towards a Greek-style second bailout accelerated after its principal private lenders indicated that they were growing weary of assurances from Lisbon that it could get on top of the country's debts.

Business and consumer confidence also hit record lows, following a string of pay cuts and across-the-board tax hikes that were part of Portugal's painful austerity programme.

Banks and others offering insurance against default to holders of Portuguese sovereign debt have begun demanding huge payments upfront rather than allowing costs to be spread over the term of the contract. This means that it costs €3.95m (£3.3m) to insure €10m in bonds over five years, payable now.

Analysts said that this made Portugal the second most costly sovereign debt to insure in the world, after Greece, and implied a huge lack of confidence in market circles about Lisbon's future.

Portuguese bonds have come under particularly intense pressure from investors after Standard & Poor's downgraded 15 eurozone countries earlier this month, putting Portugal in the "junk" category.

Portugal's 10-year bond yields surged on Monday to just under 16%, more than twice the level that is generally considered unsustainable.

John Higgins and Ben May, economists at Capital Economics, said Portugal would be forced out of the single currency, probably next year. Capital Economics has already predicted Greece will leave in 2012.

"The surge in yields in Portugal, which has taken place since the country's credit rating was lowered to sub-investment grade earlier this month by Standard & Poor's ratings agency, reflects growing scepticism that private-sector involvement in eurozone sovereign debt restructurings will only be applied in the case of Greece," they said in a report.

Business and consumer confidence nudged higher on average across the EU despite the fall in Portugal, though analysts were hard-pressed to explain why sentiment had improved this month against a backdrop of huge anxiety while negotiations continued in Athens over the fate of Greece and talks over closer fiscal unity were undermined by Britain's use of its opt-out.

UK consumer confidence rose, according to the Mmarket research firm GfK NOP, though it remains "seriously depressed".

Nick Moon, managing director of GfK NOP Social Research, said falls in inflation and energy prices were behind the rise. He said the feel-good factor may return with added strength with the arrival of the Olympics and the Queen's diamond jubilee, which could improve expectations for the economy and people's own finances.

 

 

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