More consultation is needed before the government agrees plans to change how aircraft are used in airline insolvencies, a trade body has warned.
R3, the insolvency and restructuring trade group, was responding to transport secretary Grant Shapps comments made in a Commons debate on the failure of Thomas Cook.
Shapps told MPs: “Firms need to be able to look after their customers and we need to be able to ensure their planes can keep flying in order that we don’t have to set up a shadow airline.
“The [Monarch Airlines collapse] review reported on 9 May 2019 and suggested what we should do is have rules which are not dissimilar to the German rules to allow our airlines to trade in administration. Which would make repatriation massively easier because we could use those airlines.
“This is where we will focus our efforts in the next couple of weeks. We will require primary legislation, and, dare I say it, a new session of Parliament.”
But R3 president Duncan Swift warned there are practical reasons why this can be difficult to do when an airline is insolvent.
He said: “During an airline or travel company insolvency, planes are vulnerable to being held hostage by overseas creditors and suppliers and other stakeholders, which puts aircraft, crew and passenger safety at risk. Using chartered flights avoids this scenario.
“Changing the law in the UK won’t necessarily change the behaviour of creditors overseas. We’re yet to see a convincing solution to this potential problem.”
The government is considering proposals made by the airline insolvency review, created in the wake of the Monarch failure.
Among the recommendations is a proposal that airline insolvency procedures prioritise passenger repatriation over repayments to creditors.
Swift said: “Prioritising passenger repatriation is practical if there is a means to pay for doing so. Without some form of insurance scheme, repatriation efforts would need to be funded by the insolvent airline itself. This would completely deplete what could be repaid to the airline’s creditors, and would make lending to or trading with an airline a very risky business.
“Atol protection could provide funding for repatriating package holiday travellers, but a solution is needed for flights-only travellers, too.
“The government’s intentions are good, but more detail is needed on its proposed solutions.
“Like most areas of insolvency, airline and travel company insolvencies are complex and need legislation that considers and caters for the full breadth and depth of people and groups affected, rather than something that is focused just on passengers.
“Repatriation of passengers is understandably an early priority, but they’re not the only stakeholders that have to be considered in the overall process.”
The Civil Aviation Authority has flown home around 46,000 holidaymakers in the first three days of its £100 million repatriation operation. About 95% of people have flown home on their original departure date with Thomas Cook.
“We have now also contacted over 2,000 hotels to enable Atol protected holidaymakers staying there to have peace of mind and enjoy the rest of their holiday without losing out financially,” CAA chief executive Richard Moriarty said.
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