On Monday (April 16), the government launched a month-long consultation on airline insolvency, with initial evidence due by May 11.

The Airline Insolvency Review (AIR) was announced following Monarch’s demise, which cost the government £60 million when it repatriated around 110,000 passengers stranded overseas – regardless of whether they had booked an Atol-protected package.

The review will explore practical matters such as repatriation and who foots the bill. Chairman Peter Bucks is expected to present his final report to the Department for Transport by the end of the year.

Derek Moore, Aito chairman, said the “brutal truth” was the government “paid the price” of stepping in last October: “The government never needed to get its hands dirty,” he said.

“They chose to use public money to repatriate people because they were worried about the PR impact [Monarch collapsed during the 2017 Conservative party conference].

“It was clear if people bought flight-only, they took a risk.”

Moore said the “easiest and simplest” option would be to create a separate fund covering just flight-only bookings: “There would be no confusion with Package Travel Regulations (PTR),” he said. “But I bet the airlines would squeal.”

In 2000, the government set up the Air Travel Insolvency Protection Advisory Committee (Atipac), which discussed a £1 levy on outbound flights. It was resisted by larger airlines adamant their contributions should not bail out less reputable or financially unstable operators.

“No airline is safe though,” Moore added. “The government wants this off its hands. It doesn’t want to [have a Monarch situation] again. We recommended all this years ago. But the government bowed to pressure from the airline lobby – and paid the price with Monarch.”

Alan Bowen, the Association of Atol Companies’ (ACC) representative on Atipac, said he welcomed the review, given it would be unlikely, and impractical, for the law to be changed to allow airlines to hold Atol licences.

“The government’s worry is because they did this for Monarch, they will have to do it every time,” he said. “Reading between the lines, it’s about how the government can avoid paying a penny should this happen again.”

Bowen said there were blueprints for airline insolvency schemes such as Denmark’s Travel Guarantee Fund, which has a specific sub-section to cover flight-only bookings where all airline passengers pay a levy of two Danish krone (approx 20p) to protect against insolvency or other failures. This scheme is noted in the consultation.

He added other options included airlines creating their own individual bailout pots or requiring them to insure all flights.