Following on from the collapse of Monarch airlines, the Treasury has also announced that government is to launch a review, led by an independent chair, into consumer protection in the event of an airline or travel company failure. This will draw on lessons from the collapse of Monarch and will consider both repatriation and refund protection to identify the market reforms necessary to ensure passengers are protected. This will include full consideration of options to allow airlines to wind down in an orderly fashion so that they are able to conduct and finance repatriation operations without impact on the taxpayer.
Insolvency trade body R3 has warned this could result in duplication of effort, since the government has already announced plans to reform the insolvency rules. Adrian Hyde, R3 President, said “The Chancellor must tie his new airline insolvency review into the government’s existing corporate insolvency reform efforts. Having announced welcome reforms in May 2016, the government has made almost no progress since.”
“The government’s stalled reforms would boost the chances of business rescue, which could mean a smoother experience for passengers and higher returns to creditors. The insolvency process can be inconsistent for consumers where different sector regulators apply their own rules and regulations to the UK’s insolvency laws. The loss of regulatory licences upon entering insolvency, as happened with Monarch, can prevent business rescue and increase the impact of an insolvency on consumers, employees, and other stakeholders. This sort of issue can be found elsewhere, such as in the care or financial sectors, for example.”
“The government’s existing reforms would potentially “fix” this problem by safeguarding “essential supplies”, like operating licences, for those businesses in a rescue procedure.”