Could the Spanair shutdown scramble have been avoided?

Spanair was selling tickets on its website at 5.30pm on Friday. Only half an hour later, its board of directors was discussing the company's swift and sudden shutdown. By around 8pm, its airplanes were already grounded. Just a few hours after that, 83,000 people who were scheduled to take a Spanair flight this week were scrambling to find alternative flight plans.

And the worst part is that the scenes of passengers stranded at airports are nothing new. Air Madrid and Air Comet left similar trails of desperate ticket holders in their wake when they went bankrupt in 2006 and 2009, respectively.

Why can't airlines go under in a more orderly way?

Experts agree that airlines are always going to shut down abruptly for security and economic reasons. But ceasing operations from one minute to the next should not necessarily result in chaos. Carriers - even those that are doing well - should always have contingency plans in place, as well as communication and information protocols to assist passengers.

"Spanair really made a botch of it," says Rubén Sánchez, of the consumer association Facua. "Could it have done things even worse? I suppose so. But it's been one huge mess. The law mandates that passengers must be reassigned to other flights free of charge. But in this case, people had to pay for a new seat. Besides that, Spanair's customer service lines were not working, any existing information was contradictory and their website went down, as though we were talking about a beach bar instead of a serious company."

Airline chairman Ferran Soriano justified the decision to shut down without prior notice on the grounds of "prudence and safety." Company sources say Soriano meant it would be unsafe for airline workers to find out in the middle of a flight that their jobs were gone. The pilots and cabin crew were already very nervous on Friday morning, say the same sources, when they heard through the media that the Catalan government would not be injecting any more public money into the airline after merger talks with Qatar Airways broke down. There was no liquidity to keep paying for running costs such as fuel or airport fees, so once the board decided there was no other way out, all activities ceased instantly. On the following Monday, the company filed for voluntary bankruptcy, declaring liabilities of over 300 million euros.

Spain's aviation legislation has a military origin, explains Josep Francesc Valls, who teaches at Madrid's ESADE Business School. This means that informing civil aviation and following security protocols always takes precedence over filing for bankruptcy in the courts.

"And once the decision to stop flying has been made, the main thing is to avoid airport chaos," he says. "A warning several days in advance would have created more problems, both in terms of labor relations and passengers."

The SEPLA pilots union supports the airline's argument about the need to avoid halting operations at a time when flight crews may be placed in a stress situation.

"Both international federations and pilot and civil aviation associations agree that the stress can cause a drop in safety levels," explains the head of the technical department at SEPLA, Ariel Shocron.

"In these cases you need to be extremely cautious, and it is obvious that labor conflicts are a cause of stress. A pilot cannot fly if he doesn't know whether he'll be able to provide for his family."

And even though the real cause of Spanair's closure was failure to find an investor, "safety is the priority."

But the president of Spanair's workers union, Ricardo Oso, disagrees. "The issue of the crews is a relative thing, because in our line of work when someone cannot fly or is on leave, we use someone from the reserve," says Oso, noting that Spanair flights were in the air most of the day Friday "in the middle of rumors about the company shutting down."

Oso thinks safety was not the priority during the decision-making. "Up until now we have been politically correct, but we have the feeling that we've been liquidated. It's true that management of the company has not been exemplary, but there is a political component to this matter. How else do you explain that Vueling was the main beneficiary of the shutdown, and that Qatar Airways backed out of the deal right after Vueling complained to Brussels?"

The union leader believes that despite all the public cash injections from the Catalan government, which has had a 24-percent stake in the airline since 2009, "Spanair was allowed to fail." If Iberia were in a similar situation, he says, "they wouldn't let it happen."

Other sources in the airline industry suggest a different reason for the abrupt closure: the airplanes. Spanair's aircraft fleet is not its own property (the planes are leased), but it remains the company's responsibility. Everything is much easier for the carriers if official news of their closure comes when all their planes are back at home base. If Spanair had announced it was ceasing its operations at noon, worker safety concerns would have meant that the flights back to base would have been grounded, and people could have been stranded all over Europe. Instead, the announcement was made when all the planes were back home.

"If you shut down and leave your airplanes at an airport where you have no base, everything gets a lot more complicated," said sources at another airline. "Who will fly them back to base? Who will pay for the fuel? And who can guarantee that the airport will not keep the plane there as security against any amount you might owe to the airport authority?"

So does all this mean that when an airline is headed for bankruptcy, the only option is to stop flying? Past experience in Spain would suggest so. But it's a different story in the United States. American Airlines filed for Chapter 11 bankruptcy protection in November, yet continues to fly. This pre-bankruptcy status leaves the company some leeway for restructuring, and even though there is judicial intervention, the owner generally maintains the power of decision over the company. Many firms eventually manage to get back on their feet.

There have been dozens of such examples in the airline industry, especially in the aftermath of the 9/11 attacks. United Airlines filed for bankruptcy yet still exists today. "In Spain, when a company in the airline industry files for bankruptcy, it's because its wound is deadly. At least, that's the way it's been so far," says a consultant.

"Perhaps the problem is worse with airlines because they are always living on the edge," says Rosario Silva, who teaches at Madrid's IE Business School.

"Spanair seemed to have a clear liquidity problem, but it was still functioning. A bankruptcy is always a difficult thing, but in the case of an airline, the cost to citizens is always very high."

But notwithstanding its economic performance, when an airline decides to halt operations it still has some leeway to do things a little better or a little worse. "They could have programmed a solution earlier," complains Cándido Conde-Pumpido Varela, a lawyer and co-creator of the Association of Victims of the Spanair Shutdown (ACOS). "They could have coordinated with the government with plenty of time, not one hour before [the shutdown]. They could have readied contingency plans much sooner, considering the possibility that this might happen."

The ACOS support group was created on Sunday and Conde-Pumpido and his partner Francisco Martínez-Fresneda, say there are hundreds of people interested in joining. "We created it because we've been personally affected by it," says Conde-Pumpido, who is the son of the former state attorney. "But workers are having the worst time of all, because the company was lying to them throughout. It told them everything was fine and that the deal with Qatar Airways was nearly clinched. They were the first people to be duped."

The consumer association Facua believes that a deeper transformation is necessary. If the government forced airlines wishing to operate to leave a deposit, that money could be used in the event of bankruptcy to reassign passengers and pay them compensation. Also, says this group, the Public Works Ministry should send inspectors to the airports to check whether carriers in trouble are assisting their passengers adequately.

"Airlines ignore the law and nobody says a thing. That's why they never make any changes," says Rubén Sánchez.

Óscar Serrano, a lawyer for the Catalan legal service Col·lectiu Ronda, agrees with the idea of creating a "flight guarantee fund."

"If the government wanted, it could encourage this guarantee fund," he says. If a passenger is stranded and has to put up money for food and lodging, there is little chance of getting that money back. Claiming the amount from a liquidated company has very few chances of success.

Meanwhile AENA, the airport authority, defends Spanair even though the Public Works Ministry said the company could be fined up to nine million euros over its "abrupt shutdown." According to AENA sources at Barcelona's El Prat airport, if the company had begun preparing the closure one or two days earlier, nobody would have guaranteed that employees would keep showing up for work.

"The competition has behaved in an exemplary manner," says this source. "They immediately responded to the call to reassign passengers. There was no chaos at the Barcelona El Prat airport despite everything."

Valls, from ESADE, also believes that considering the "dramatic" situation, things were done "acceptably well."

"It is impossible to do things absolutely well, because you're always going to leave people stranded," he says.

But Ricard Santomà, an expert in tourism management and director of the TSI-Turismo Sant Ignasi tourism school, is not so sure. Although he agrees that airline bankruptcies are a complicated thing, he also believes that chaos was avoided by circumstance rather than Spanair's actions. For one thing, the shutdown occurred in January, which is traditionally a slow month. "This meant that Spanair had fewer passengers, but also that the competition had extra seats for those who were stranded," he notes.

Also, Spanair was quite focused on business travel. "This type of passenger is less sensitive to price. If they miss a flight, they seek another one right away even if they have to pay for it, because they need to get to a meeting."

Had this happened during the summer or Christmas vacation periods, and involved long-haul flights (which is what happened to Air Madrid in 2006), says Santomà, the disaster would have been several orders of magnitude greater.