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Flight risk: All the legal implications of airline failure

In light of the demise of Thomas Cook Airlines, Kemp Little LLP explains the legal implication of airline failure for agents. 

TRFBLI
What happens when an airline fails?
What happens when an airline fails?

If an airline collapses, the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR) place a number of obligations on package organisers – including supplying the package holiday as booked by the customer.

 

The flight is only one component of the overall package and the airline is a supplier, so airline failure is like any supplier failure – albeit probably one which causes most disruption to a booked package.

Customers not yet travelled

For future bookings, package organisers will need to make alternative arrangements to allow the customers to travel, at no additional cost to the customer.


If the package organiser is unable to offer suitable alternative flights (for example due to a lack of capacity, or where the cost of the alternative flights is disproportionately high compared to the cost of the package), package organisers can cancel the customer’s package and give them a full refund.

 

However, this will only be acceptable for customers due to travel in the immediate or imminent future.


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For example, with Thomas Cook Airlines, it was advised that cancellations would be acceptable for customers travelling up to two weeks after the failure.


For customers due to travel beyond this period, they should be rebooked on alternative flights with as little disruption to their booked package as possible (and again, at no additional cost).


If this isn’t possible and the alternative flights result in a significant change to the customer’s booked package, (i.e. the departure time changes by more than 12 hours or the customer has to travel from an airport which is much further away), then customers are entitled to cancel their booking and receive a full refund.

 

If customers accept the changed arrangements but this results in their overall package being of a lower standard, (for example if they lose a day of their holiday), customers are entitled to a price reduction.


Under the PTR, customers are entitled to compensation where their package is cancelled, whether by the package organiser or where the customer doesn’t accept a significant change and elects to cancel their booking.

Farina Azam, partner and travel lead at Kemp Little
Farina Azam, partner and travel lead at Kemp Little

An exception is where the cancellation or significant change is due to “unavoidable and extraordinary circumstances” (UEC).

 

Airline failure would generally be considered UEC, and so package organisers are not legally obliged to pay compensation to customers of cancelled packages.

Customers already abroad

For customers already on holiday at the time of the airline’s failure, the package organiser is responsible for bringing the customer back to their point of departure.

 

This will mean booking alternative flights (or arranging alternative transport) back to the customer’s UK departure point, at no extra cost to the customer.


The package organiser is also obliged to accommodate the customer for up to three extra nights, if the customer cannot return to their departure point due to unavoidable and extraordinary circumstances.

 

Such accommodation should be of a comparable standard to that booked by the customer.

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