The Airline Insolvency Review has published its interim report – finding passengers must have clarity and confidence about risks of airline insolvency.
The review was established by the UK Department of Transport following the collapse of Monarch Airlines in 2017.
Findings included that too many air passengers are flying without adequate protection against the insolvency of their airline and it found passengers must have clarity and confidence about the risks of airline insolvency and how they are protected when they travel.
The review also found the current protection landscape does not give passengers enough support, is often confusing, and can lead to some passengers paying twice for the same protection while others, whether they know it or not, go unprotected.
Airline Insolvency Review chair, Peter Bucks said when an airline goes out of business, it can affect large numbers of people who can often look to their government and the taxpayer to assist them in their hour of need.
“Even though airline insolvencies are relatively rare, we need to be prepared to deal with the consequences for passengers when one occurs. Ensuring all passengers can get home requires organisation, funding and in many cases more than simply rebooking onto other flights,” he said.
Bucks added: “In the event of an airline insolvency, the review has identified that the most effective option is to keep the fleet of an insolvent airline flying. However, this is not without considerable challenges, risk and expense.
“Therefore it is necessary to ensure a range of options are available, including using existing alternative capacity where possible and chartering additional aircraft. This approach will be described in more detail in the final report.”
The review looked at the capacity available on the world’s busiest route, London–New York. Findings that for some airlines with high market share, even on this route, using existing alternative capacity would not be sufficient to enable all passengers to complete their journeys without significant delay.
The analysis found that in the case of British Airways, there would be nearly four passengers chasing each available alternative seat.
Even looking beyond routes between New York and London and including all major US hubs and all UK airports, the review said it would still be at least two passengers for each available alternative seat.
The review concluded that sufficient capacity was only therefore likely to exist for all airlines if European hubs were used and passengers undertook journeys with multiple legs.
The analysis also showed that the position is likely to be worse for short-haul holiday flying, where highly seasonal, mainly outbound routes are common and lead to very low availability of alternative capacity.
The review estimates the availability of charter aircraft to repeat a Monarch style operation, to be currently limited to around 60 aircraft outside the peak season. It is therefore not sufficient to deal with the larger airlines operating to and from the UK.
The review assessed the insolvency risk of the top 17 UK airlines that account for over 80 per cent of the UK’s air passengers and it found the average risk of any one insolvency is around 25 per cent in any one year.
For the 11 airlines with publically available credit ratings the average probability rises from six per cent this year to 13 per cent in 15 years’ time. It found, on average an airline insolvency would impact 500,000 passengers in 2018 to nearly 900,000 in 15 years’ time.