UK airline passengers could be better protected if their airline collapses under proposals set out following a review of airline insolvency commissioned by the Department for Transport in the wake of Monarch Airlines’ 2017 collapse.

The failures of XL Airways in 2008 and Monarch both led to the government asking the Civil Aviation Authority (CAA) to intervene to bring stranded passengers home, the Department for Transport said as the May 9 final report was released.

The report recommends a new Flight Protection Scheme amounting to less than 50 pence ($0.65) per person, which would protect passengers if an airline became insolvent while they were abroad, as well as reforms to the UK’s airline insolvency regimes so carrier’s own aircraft can be used to repatriate its passengers should it fail.

It also suggests improving awareness and uptake of safeguards to protect customers with future bookings, when airlines collapse.

Transport Secretary Chris Grayling commissioned the Airline Insolvency Review following the October 2017 collapse of Monarch Airlines, when 85,000 passengers were repatriated in the UK’s largest peacetime repatriation operation, with the CAA stepping in to charter more than 30 aircraft to get stranded passengers home.

Peter Bucks, who chaired the review, said: “We know passengers expect to be protected from being stranded overseas if their airline should collapse, but in practice, each year many people fly without any such protection. Although airline insolvencies are relatively rare, as we have seen in recent months they do happen—and at times have required government to step in to repatriate passengers at great cost to the taxpayer.”

The report states that although about 80% of passengers originating from the UK have some form of protection against financial loss, only those who have bought tickets under the ATOL scheme—around a quarter—are fully protected if they find themselves stranded abroad because their airline has become insolvent.

“We are therefore proposing a comprehensive scheme to protect all UK-originating air passengers, with the associated costs met largely, if not wholly, by the private sector. We refer to this as the Flight Protection Scheme, which would be coordinated by the CAA, and backed by requiring each airline serving the UK market to provide suitable financial protection based on the estimated cost of repatriating its passengers,” Bucks wrote in the report, adding: “We estimate that on average the new scheme would in total cost less than 50p for each passenger protected.”

The additional costs would fall indirectly or directly on passengers but are not expected to have an effect on supply and demand for air travel, he added.

The report also put forward the possibility of using an insolvent airline’s own aircraft to aid repatriation. “Our review of the ability to keep the fleet of an insolvent airline flying suggests that it would be feasible for UK airlines, but only if some significant challenges can be overcome.”

Changes to UK regulations would be needed, including the development of a Special Administration Regime for airlines, which would enable an insolvent airline to continue to operate its fleet for a limited period to bring passengers home as well as regulatory changes to allow airlines to operate in administration, and to provide the CAA with greater oversight of airlines in distress.

“We will now consider the range of options put forward by the review, and will work to swiftly introduce the reforms needed to secure the right balance between strong consumer protection and the interests of taxpayers,” Grayling said.

Helen Massy-Beresford, helen.massy-beresford@aviationweek.co.uk