TravelMole.com has today reported the collapse of Low-cost Spanish airline Spanair.

The Barcelona-based airline has ceased operations leading to 647 flight cancellations and leaving more than 20,000 passengers stranded.

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.

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.

Columbus Direct covers those affected by airline bankruptcies thanks to its Scheduled Airline Failure Insurance, included for free on all insurance policies.

Travel Insurance is about more than just broken bones and lost bags.  The recent global economic downturn has led to a number of airlines going out of business, leading to problems for British holidaymakers.  With the airline industry continuing to look vulnerable under economic pressures, Columbus Direct is proud of its Scheduled Airline Failure Insurance, which protects holidaymakers in the event of airlines going out of business.

Columbus customers affected by the Spanair collapse needing to make a claim should check the Scheduled Airline Failure Insurance document which can be found attached to your policy email, or within the printed policy pack if you received your documents by post.