Airline insolvency solutions 'risk devaluing existing financial protections'

Travel Network Group chief executive Gary Lewis told TTG that if the government resolves to protect all air tickets, it would give consumers less reason to book with TTNG members who already offer full financial protection through the Atol scheme.

His warning comes amid a further delay to the publication of the review’s findings, which has been put back until May, TTG understands.

Chairman Peter Bucks had been due to report to ministers in January, which then became March and now May. The Department for Transport did not respond to TTG’s request for confirmation.

Lewis said while he welcomed the review from a consumer perspective, solutions such as a levy on air tickets risked devaluing one of the main reasons for booking with TTNG members.

“Our members already offer financial protection, inclusive of flights, through the Atol scheme,” he said. “There’s debate to be had about whether the system we [travel] have is the best or most efficient, but we have to be careful what we wish for.

“Our industry has for many years built up public trust in Atol, Abta, The Travel Trust Association, etc. If there was a levy, then it gives people another reason not to book with our members, as it would be repeating part of that protection.”

Other senior industry figures, meanwhile, have raised concerns over whether the government will actually act on Bucks’s recommendations, despite a flurry of airline failures in recent months.

Primera Air and Cobalt Air failed last October, followed by Germania and Flybmi in February.

WOW Air’s future, meanwhile, hung in the balance at the weekend after Icelandair walked away from a potential rescue deal, although the airline is now in talks with investors.

“It would be a mistake not to take this opportunity to safeguard the travelling public,” Aito director Noel Josephides told TTG.

The review was convened following the collapse of Monarch in October 2017. The government immediately ordered the repatriation of all 110,000 Monarch passengers stranded overseas, regardless of whether they had Atol protection or not, at a cost of around £60 million to the taxpayer.

Bucks was tasked with finding a more elegant solution that would address public expectation of government in the event of future insolvencies following the precedent set by its reaction to the Monarch crisis, and remove any burden to the taxpayer.

Proposals discussed in an interim report published last year included a levy on all airline tickets, including flight-only bookings, to fund additional protection, or a market-driven insurance model, among other options.

Josephides continued: “Powerful players in the market worry a levy on outbound airlines would affect their business by boosting public confidence in booking with these smaller, less-established carriers – who can offer cheaper fares – safe in the knowledge they won’t lose their money and will be repatriated in the event of failure.”

He added any legislation arising from the review must not act as a barrier to new airlines entering the market.