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 regional government of northeastern Catalonia says it can no longer supply Spanair with funds.
The Ministry of Development also published a statement requiring Spanair to "fulfil its obligations with passengers" adding it was co-ordinating "alternative transport."
The Catalan government said the "current economic climate" and "European legislation concerning competition" made it impossible for it to continue financing the small carrier whose hub is Barcelona airport.