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Overhaul of airline insolvency process


28 October 2019: In the wake of the recent high profile collapse of Thomas Cook and the demise of Monarch Airlines in 2017, new legislation is to be put forward to reform the airline insolvency process in order to protect and repatriate passengers more effectively. The Airline Insolvency Review was set up by the Department for Transport after Monarch Airlines entered administration in October 2017 and it recommended reforms as a result, which have now been hastened after Thomas Cook was placed into compulsory liquidation.

The inability to use the Thomas Cook fleet in the immediate aftermath emerged as a particular issue and forced the Civil Aviation Authority to enlist multiple carriers to source sufficient capacity. This is estimated to have cost the taxpayer £100m and getting stranded passengers home after the Monarch Airlines collapse is estimated to have cost the taxpayer £50m. Under the proposed legislation the CAA would be able to mitigate the impacts of a future failure, says the Government. The changes will provide the CAA with the ability to grant a temporary airline operating licence allowing the carrier to continue repatriating passengers after insolvency.

Introduction of a special administration regime, for airlines and tour companies, will keep aircraft flying long enough for passengers to be fully repatriated and supported and the CAA’s remit will be extended to apply to repatriation of passengers whether they are protected or not under the ATOL air travel scheme, which was set up in 1973 to refund and return passengers in the event of an airline failure. But the government cautions that there is no “silver bullet solution” and that a transition period might be necessary to enable the industry to adapt. One of the other recommendations from the Airline Insolvency Review was for a compulsory levy on airlines of around 50p per passenger to be introduced to help fund repatriation efforts but this has not been incorporated into the proposed legislation. A number of airlines had lobbied against this levy being introduced, saying it would put UK carriers at a competitive disadvantage.

If you have any queries about this article, or indeed any insolvency related matter, please do not hesitate to contact any of the BRI management team.