One in 200 passengers will be affected by airlines going bust over the next 15 years: that is the prediction of the Airline Insolvency Review, set up after the collapse of Monarch last October.
By the end of that spell, says the interim report, a typical airline failure could affect nearly 900,000 passengers, compared with half a million today – roughly the number caught up in the Monarch collapse.
“This increase in affected passengers is driven by passenger demand growth and increasing insolvency risk,” says the report.
Around 110,000 Monarch passengers were abroad when their airline went bust. The Civil Aviation Authority operation to bring them home cost the government £60m – a cost of £545 per passenger, for a typical flight of two or three hours.
Peter Bucks, the chair of the review, said the failure of Air Berlin at roughly the same time, was treated very differently: “The German government chose to provide immediate financial support to keep the airline temporarily running through administration.
“Two insolvencies with two different responses. Both managing to avoid thousands of passengers being left to fend for themselves, both costing the taxpayer significant amounts of money.”
His report says there is no “one-size-fits-all” solution to repatriating passengers in the aftermath of an airline failure. Passengers booked on a small airline that collapses outside the summer peak might be able to be absorbed by existing carriers, but larger UK airlines would need to be kept flying in administration to ensure passengers are able to get home in a timely fashion.
The review concedes, however, that this approach “is not without considerable challenges, risk and expense”.
In the event of a failure, aircraft leasing firms demand the return of their planes, and ground handlers – typically owed hundreds of thousands of pounds – are reluctant to keep providing services.
The review envisages: “A temporary moratorium to prohibit suppliers and other creditors from withdrawing services, demanding payments, and restrictions on enforcing security over an airline’s property during a short repatriation period.”
The Monarch collapse revealed widespread confusion over consumer protection.
Mr Bucks said: “On any one flight several of the passengers may have unwittingly paid twice or more for the same protection.
“Others, whether intentionally or otherwise, may not have paid for any protection at all and may be carrying the risk of insolvency themselves.”
Mark Tanzer, chief executive of ABTA, the travel association, said: “ABTA has been highlighting for some time that the lack of any formal protection arrangements for scheduled flights leaves many passengers at risk, and the government and taxpayer with a potential repatriation cost.
“This review is an opportunity to set this right.”
The review is examining a levy of around 20p per ticket which was imposed by the Danish government after the failure of a relatively small airline, Cimber Sterling. But airlines are strongly opposed to anything which increases the cost of flying.
The final report is expected to be published by the end of the year.
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