Airline Insolvency Review

At present there are several mechanisms that protected passengers from airline insolvency, but existing protections are incomplete. Only around 80% of UK-originating passengers have some form of protection from financial loss due to the failure of an airline.

The Department for Transport published on 9 May 2019 the final report from the independent Airline Insolvency Review, which was chaired by Peter Bucks. The report has been published online on the Gov.UK website.

The Secretary of State, then Chris Grayling, commissioned the review following the collapse of Monarch Airlines in October 2017, when 85,000 passengers were repatriated by the Civil Aviation Authority (CAA) at a cost to the taxpayer. More recently, in September 2019, winding-up orders were made by the court against the Thomas Cook Group companies. Following authorisation by the Government, the CAA orchestrated the repatriation of over 140,000 passengers.

The Airline Insolvency Review considered both refund and repatriation protection in the event of an airline’s failure. Its key recommendations, as outlined in its final report, are as follows:

• A new Flight Protection Scheme, which would protect passengers if an airline became insolvent while they were abroad. It is estimated the cost of the protection will amount to less than 50p per passenger on average.
• Reforming the UK’s airline insolvency regime so an airline’s own aircraft can be used to repatriate its passengers should it fail.
• Providing the CAA with the necessary powers and capability to coordinate repatriation operations for all sizes of airline.
• Improving awareness and take up of safeguards which protect the future bookings of customers, when airlines collapse.

The Government has yet to publish a formal response. However, on 25 September, in response to questions about the collapse of Thomas Cook, the Secretary of State for Transport, Grant Shapps, told the House that the Government would be looking at the reforms proposed by the review. In a subsequent letter to Lilian Greenwood, Chair of the Transport Committee, the Secretary of State wrote that he was determined to bring in a better system for dealing with airline insolvency and repatriation. The Queen’s Speech delivered on 14 October 2019 included proposals for legislation on airline insolvency.

This Commons briefing paper provides a summary of the background to the Airline Insolvency Review and its key recommendations. In the process, it provides an outline of the different protections against financial loss currently available to passengers in the event of the insolvency of an airline.