The Government has launched a review of consumer protection in the event of future airline failures that could dwarf the collapse of Monarch, which led to an airlift of over 100,000 stranded passengers at a cost of £60m.
The Department for Transport said the independent Airline Insolvency Review, chaired by Peter Bucks, will look at ‘how to ensure airlines can wind down in an orderly fashion with the minimum impact on passengers and the taxpayer’.
In the foreword to a call for evidence, Mr Bucks wrote that the current ATOL scheme ‘has proved its worth in past cases of travel company failure…. But a growing proportion of leisure travel by air is now represented by purchases that are not covered by the ATOL scheme’.
He added: ‘Moreover, with the forecast long-run growth in demand for leisure travel by air and the degree of consolidation that may be expected in the European airline sector, the scale of any future failure may well be greater than anything the scheme has dealt with in the past.
‘Future failures could thus overwhelm the resources currently available to the scheme and so potentially have major adverse implications for Government and the taxpayer.’
Officials said the review will draw on lessons from the collapse of Monarch last year and will consider both repatriation and refund protection to identify the market reforms necessary to ensure passengers are protected.
The terms of reference for the review state that it will consider ‘alternative models for the provision of refund protection, including through the travel insurance market’.
The review will provide an initial report to the transport secretary by the summer and a final report by the end of 2018, offering recommendations on repatriation, refunds and on ‘how the current financial protection arrangements for air-travel holidays can be put on a more commercial basis’.