New safeguards planned for passengers when airlines take off to ‘destination insolvency’

NEW proposals to protect passengers if an airline hits turbulent times and flies into insolvency are set to come into force.

Amid a difficult financial headwind for the sector, the Department for Transport has just published the eagerly-awaited final report from the independent Airline Insolvency Review.

The Transport Secretary Chris Grayling commissioned the research following the sky-high nosedive into insolvency of Monarch Airlines in October 2017.

Failure to launch a business recovery strategy and chart a flight path around insolvency resulted in no fewer than 85,000 passengers being repatriated – many from Yorkshire and the North East.

Leeds-Bradford Airport was among those hardest hit by the insolvency, which triggered the UK’s largest peacetime repatriation operation by the Civil Aviation Authority. Many employees working at Leeds-Bradford Airport lost their jobs because of the insolvency.

The past decade has seen two of the largest airline failures in UK history, with the collapse into insolvency of XL Airways and Monarch Airlines.

The review has considered consumer protection in the event of an airline or travel company financial failure, and draws on lessons from the collapse into insolvency of Monarch Airlines.

The key recommendations from the report are as follows:

  • Proposals for a new Flight Protection Scheme amounting to less than 50p per person, which would protect passengers if an airline became insolvent while they were abroad
  • Reforms to the UK’s airline insolvency regimes so an airline’s own aircraft can be used to repatriate its passengers should it fail
  • Improved awareness and take up of safeguards which protect customers with future bookings, when airlines fail to launch a successful business recovery strategy and collapse into insolvency, administration, liquidation or bankruptcy.

For many passengers caught up in the previous insolvency cases –  Bradford to Barnsley, Leeds to Lincoln, Harrogate to Huddersfield, Darlington to Doncaster – it is too late to benefit from the new insolvency protection safeguards.

But they still have the opportunity to get on board and comment on the proposals.

Anyone can respond as part of the ongoing consultation on Aviation 2050, which closes on 20 June.

Chair of the Airline Insolvency Review Peter Bucks said: “We know passengers expect to be protected from being stranded overseas if their airline should collapse into insolvency, but in practice, each year many people fly without any such protection.

“Although airline insolvencies are relatively rare, as we have seen in recent months insolvencies do happen – and at times have required Government to step in to repatriate passengers at great cost to the taxpayer.

“Our recommendations set out a series of practical suggestions to ensure that passengers are protected, particularly in the event of a large-scale insolvency like Monarch.

“Amid insolvency, ensuring all passengers can get home requires organisation, funding and in many cases more than simply rebooking onto other flights.

“I hope that the work of the review will – while there is no silver bullet – act as a catalyst to ensure that both passengers and taxpayers are appropriately safeguarded when airlines collapse into insolvency in the future.”

For more information about the work of our licensed insolvency practitioners and businesses recovery teams in Leeds, Bradford, Harrogate and Darlington, please call us on 03300 244 660 or email confidential@walshtaylor.co.uk