Opinion: Five principles for dealing with airline insolvency

Opinion: Five principles for dealing with airline insolvency

Following a ‘muddying of the waters’ after last year’s Monarch collapse, Abta’s Mark Tanzer calls for consumer clarity and fair treatment for all involved

If you ask a customer going away on holiday this summer what will happen if their airline goes out of business – I expect many will say that the government will bring them home.

The repatriation of Monarch customers last October, whether their travel arrangements were protected or not, will have no doubt reinforced that expectation in the minds of travellers.

While many of the holidays people take each year are not protected, the political pressures around a large-scale airline failure, that leaves thousands of UK travellers overseas, remain the same today as ever.

The practical effect of this has been clear in the reactions taken by respective governments to the high profile failures in recent years, including the XL Leisure Group in 2008 and Monarch Travel Group in October 2017.

The political imperative to act on behalf of stranded UK citizens is, of course, understandable, but nonetheless the propensity to act first, and seek clarity around protection status later, only adds to the continuing confusion and frustration when a failure occurs, both for customers and the industry.

In particular, repatriation of all citizens regardless of protection status muddies the waters around the value of purchasing protected travel arrangements.

What has been encouraging since the Monarch failure is that the Government is undertaking a review into how airline insolvency should be dealt with.

Abta has argued for some time that the current protection regime hasn’t kept pace with how people plan and book their holidays. This review is an opportunity to get it right.

The first stage of the independent Review into Airline Insolvency, chaired by Peter Buck, was a call for evidence to understand the viable options for reform.

Abta has approached this first stage with an open mind, and following consultation with Members, has not advocated for any particular model at this stage.

Instead, we have proposed five design principles, which we believe should drive the Government’s approach to airline insolvency. These are:

• Giving consumers transparency and clarity around consumer protection;
• Preventing market distortions between competing businesses – in particular not allowing a new rule to fall only on UK airlines and travel organisers in a market where consumers are served by carriers from many other jurisdictions;
• Avoiding duplication of consumer protection costs, and additional cost burdens for businesses currently providing protection;
• Providing all purchasers of airline seats with equality of protection – consumers, business travellers, travel agents/intermediaries and organisers; and
• Making sure that funds are immediately available in the event of failure, to pay for repatriation.

We believe alignment with these principles will deliver a solution that meets the interests of consumers, and the wider travel industry.

Our response also provides detailed analysis of the points addressed in the review around existing products and future regulatory options.

Ultimately, Abta’s position is that whatever option is adopted, we need to ensure that there is clarity for consumers fair and equal treatment for companies who are in the business of making available flight seats in whatever capacity.

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