Government reveals airline insolvency reform

New legislation is being proposed by the government to create a new class of special administration to allow failed insolvent airlines to be able to fly passengers home.

Under the existing system, when an airline folds its planes are grounded, leaving passengers at risk of being stranded The government believes enabling the CAA to use an airline’s existing planes and crew in future cases would mean there is less disruption and cost to taxpayers.

Insolvency legislation is set to be reformed to enable bankrupt carriers to be put in “special administration”, meaning their aircraft and crew can continue flying.

Duncan Swift, President of insolvency and restructuring trade body R3, said “We sympathise with the Government’s wish to ‘keep the fleet flying’, but the feedback from our members is that this idea just isn’t practical: insolvency practitioners may be unwilling to take the risk of adopting this approach. There will be concerns over creditor attempts to impound planes overseas, risks to crew and passenger safety, insurance costs, and the question of how to pay for everything. Insolvency practitioners will be personally liable if anything goes wrong, too. It’s a superficially attractive option, but it’s a potentially redundant reform.”

Transport Secretary Grant Shapps said “I’ve personally spoken with Peter Bucks, the chair of the Airline Insolvency Review, and plan to draw on his expertise and bring in airline insolvency reforms as quickly as possible.”