23 APRIL 2018

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Article from BTNews 23 APRIL 2018

COMMENT: Airline insolvency

Among all the words in last week’s call for evidence for the government’s Airline Insolvency review (BTN last week), one key phrase stood out.

“There is,” the document noted, “a lack of awareness amongst passengers of the protection they have or do not have. The potential costs of an airline failure to passengers are large and we need a new way of funding them that protects passengers and minimises or removes government involvement.” Passengers on package holidays covered by the ATOL scheme are insured for such instances.

This latest action by ministers followed the collapse of Monarch Airlines last year. In its wake, the government commissioned a review to examine reforms needed to ensure passengers are protected when airlines fail. Last week’s call for evidence is the first step in the review, which will produce a final report by the end of the year.

The need for a review shows the problem – legislation in the area is muddled.  BTN  hopes this new action will make things clearer and allow the industry to move forward, not least so passengers know where they stand in the event of another airline going out of business.

After the Monarch collapse, the Department for Transport in a much-criticised move ordered the CAA to organise the repatriation of passengers at a cost of £60m – a burden, as many were quick to point out, that fell on the UK taxpayer. In some sort of acknowledgement, last week’s call for evidence notes the success of the CAA operation but questions whether it could be repeated if a larger airline or a non-UK carrier failed, or if a failure occurred in peak season.

It suggests: “The repatriation of Monarch’s passengers was an operational success largely due to the CAA’s role as the airline’s licensing authority, their access to information necessary to enable advance planning and the availability of alternative aircraft capacity at the end of the peak season.”

Key phrase number two followed: “Whether such plans could be applied and scaled up to larger airlines, airlines licensed by other authorities or at different times of the year is questionable.”

As Travel Weekly  reported this week, the call for evidence confirms the Insolvency Review will consider extending financial protection against failure to all UK-originating flights, with a levy on all flights among the options to pay for it. Note the emphasis on ‘all’.

This is setting up a potential industry face-off since, as the paper said, the UK travel trade has consistently demanded protection against airline failure be extended to all scheduled airline passengers and the CAA, as aviation regulator, has previously proposed an all-flights levy. The scheduled airlines, however, have consistently opposed such a move and the UK Department for Transport has previously ruled it out.

The signs are ministers may be about to get tougher on the subject, risking an inevitable outcry over “stealth tax”. As last week’s document puts it: “The review will set out how best to ensure consumers are protected against the consequences of airline insolvency. It will consider the practical measures needed to repatriate or reimburse people and how to fund the associated costs.”

In a third key phrase, it adds, with a sting in the tail: “When the final report is published, it will offer the transport secretary recommendations on repatriation, refunds and on how the current financial protection arrangements for air-travel holidays can be put 'on a more commercial basis'.”

Review chairman Peter Bucks said: “The Monarch failure showed the importance of passenger protection against the failure of their airline. We saw how effective the operation to repatriate passengers was, but the experience also brought home the limitations of the current protection arrangements that we will need to address.

“This call for evidence is aimed at stimulating thinking and sets out the process by which the Review will engage with the views of airlines, their passengers and others with an interest.

“We are approaching these complex problems with an open mind and are keen to hear from all with ideas.”

Are we seeing the start of a deal? Trading off an insurance tax on passengers against an airline failure, for action on another major industry bugbear, APD, could be the way to go.

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OUR READERS FINEST WORDS (All times and dates are GMT)

All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum


Ian Hamer, United Kingdom

Repatriation should be the single focus and the CAA is best placed to coordinate it. However, funding such should only fall on travellers. Again the CAA is best placed to hold such a fund with actuarial advice. The initial fund should be put in place by Government using an element of APD income to be repaid to the Treasury over time as the fund grows and there are no serious calls on it.


Ian Hamer, United Kingdom

Repatriation should be the single focus and the CAA is best placed to coordinate it. However, funding such should only fall on travellers. Again the CAA is best placed to hold such a fund with actuarial advice. The initial fund should be put in place by Government using an element of APD income to be repaid to the Treasury over time as the fund grows and there are no serious calls on it.


David Starkie, United Kingdom

Review should focus on repatriation. Reimbursement can be covered by the passenger buying travel insurance. If they don't buy that is there problem.


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