Wildcat air traffic control strikers halted take-offs across Spain on Saturday despite the military taking command of national air space and threats of jail sentences.
Prime Minister Jose Luis Rodriguez Zapatero had sent in the military Friday after civilian controllers called in sick en masse in a dispute over work hours.
But the day after strikers launched their surprise action on the eve of a long weekend, disrupting travel for an estimated 250,000 passengers, there were still no planes taking off.
"The situation is the same. There are no flights. We only have transatlantic arrivals at Madrid-Barajas, they are the only flights operational," said a spokesman for Spanish airport operator AENA.
"The situation is the same in the whole country."
The government was holding an emergency cabinet meeting Saturday morning and has warned it may declare a state of alert if controllers have not returned to work.
This could lead to prison sentences for strikers.
"If a controller does not show up to his work place, he will be placed immediately in custody accused of a crime which could mean serious prison sentences," Interior Minister Alfredo Perez Rubalcaba told reporters in the early hours.
The crisis is a major test for Spain's government, which has vowed to cut costs and douse fears of a Greek-style debt crisis, including by reforming airport work hours and privatising the airport operator AENA.
At Madrid-Barajas airport, thousands of passengers spent the night sitting or lying under blankets on the airport floor. Many were seeking refunds or flight changes.
Flight displays showed one-third of flights cancelled including to northern Spain's Bilbao, Amsterdam and Washington and warned that all flights were cancelled until at least 10 am (0900 GNT).
"Due to the Spanish air traffic controllers' illegal industrial action, all the flights will be cancelled until 10," said one panel.
Some airlines including Air France and Alitalia were handling check-ins despite the strike.
Teresa Cabezas, 6O, had been planning a four-day break in Krakow, Poland and was not sure if she would be reimbursed. "They told us the flight was cancelled and gave us claim forms," she said.
Next Monday and Wednesday are days off in Spain and many people will also take Tuesday so as to have a five-day break.
The strike action coincided with a cabinet decision Friday to change the way Spain's airports work.
The government confirmed a ruling that the maximum time worked by air traffic controllers was 1,670 hours a year but also clarified that this total did not include non-aeronautical work.
A spokesman for the Syndicate Union of Air Controllers said this meant time taken for paternity or sick leave would not count within the maximum working hours for air traffic controllers.
"We have reached our limit mentally with the new decree approved this morning obliging us to work more hours," spokesman Jorge Ontiveros said in an interview late Friday.
"We took the decision individually, which then spread to other colleagues who stopped work because they cannot carry on like this. In this situation we cannot control planes," he said.
Air traffic controllers were able to ensure the safety of planes because they worked in the right conditions, he said.
The Spanish government is fighting global financial market concerns over its public debt levels.
As part of a package of measures it has also announced the sale of up to 49 percent of AENA, raising as much as nine billion euros according to Spanish media, expanding earlier plans to sell only 30 percent.