The Budget, Insolvency Practitioners and Airlines
The 2017 Budget – Review into airline insolvency arrangements
This week’s Budget headlines were the abolition of Stamp Duty for first time buyers, the £3bn set aside to prepare for Brexit and the downgrading of GDP estimates for the next 3 years, set against a background of stagnant real wages’ growth. From the point of view of Insolvency Practitioners and the insolvency profession in general, however, there was one area of interest that did not make the headlines, as noted by R3: the review into airline insolvencies.
A Review into consumer protection in the event of an airline or travel company failure
Of particular interest in the aftermath of the Monarch administration, although not mentioned in the Chancellor’s speech, was the announcement of a review into “consumer protection in the event of an airline or travel company failure”.
This is of particular interest in light of the travel industry’s vulnerability to short term shocks, consequent administrations and the inevitable difficulties experienced by customers.
We understand that the review will consider both repatriation and refund protection and will identify the market reforms necessary to “ensure passengers are protected”. R3 points out that 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 for stranded customers without an impact on the taxpayer.
So, if you’re planning to get away for the festive season……………?
As was the case with Monarch, it can often be the loss of a regulatory licence upon entering insolvency that can trigger all of the issues associated with the collapse of travel companies: stranded customers, worried employees, and other concerned stakeholders. This is because the loss of the licence prevents business rescue measures being taken.
Thus if the review ultimately ends up recommending implementing new measures into law that will enable orderly winding downs, as opposed to the current shocks to the system, we could all be spared the prospect of another Monarch style rescue of stranded passengers.
Whether or not this review was prompted by the Monarch administration or had been in the pipeline for longer, we don’t know. Of course, any legislation won’t be ready for Christmas, but it’s a step in the right direction.
R3 also note that the same sort of issue can be found in other sectors, such as the care home and financial sectors. Perhaps a wider review, to include other sectors, along the same lines would be a good idea.