What protections are in place for consumers when an airline collapses? - Rocio Concha

My company had flights booked with Flybe before it collapsed - and now we fear losing money. Shouldn’t there be protections in place to prevent this from happening?

The news that Flybe has now ceased trading, with all flights to and from the UK cancelled, will be disappointing news for all passengers who had trips booked with the airline.

And the business impacts of airlines entering administration are also far reaching. Holiday operators who had booked flights for customers - whether for business or leisure - will be impacted, as will merchant acquirers who may have to pay out to affected customers under Section 75 guidelines.

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Travel insurers will also have to deal with lots of claims - not least because of the current lack of insolvency mechanisms when airlines go bust.

"It’s deeply regrettable when companies in any sector enter administration - not least because of the likelihood of redundancies. But in aviation, cases such as Flybe’s have not been rare occurrences, but frequent realities. Passengers caught up in them - stranded at home or abroad - deserve better," says Rocio Concha."It’s deeply regrettable when companies in any sector enter administration - not least because of the likelihood of redundancies. But in aviation, cases such as Flybe’s have not been rare occurrences, but frequent realities. Passengers caught up in them - stranded at home or abroad - deserve better," says Rocio Concha.
"It’s deeply regrettable when companies in any sector enter administration - not least because of the likelihood of redundancies. But in aviation, cases such as Flybe’s have not been rare occurrences, but frequent realities. Passengers caught up in them - stranded at home or abroad - deserve better," says Rocio Concha.

The best mechanism the travel industry currently has is the Air Travel Organiser’s Licence (Atol) scheme, which was set up to offer financial protection to consumers in the event that a business they purchased flight-inclusive packages from becomes insolvent.

Which? research found that nine in 10 survey respondents knew the name Atol. Yet despite the strong name awareness, consumers were unaware of its practicalities. For instance, around forty per cent of people we spoke to thought Atol protects all flights operating from the UK.

This lack of knowledge matters most in situations such as Flybe’s collapse.

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The reality is that very few passengers using the airline will have been on Atol-protected packages, meaning that the government is unlikely to step in and repatriate those abroad or provide refunds to those affected.

The Atol scheme simply does not reflect the changing holiday market as most flight-only bookings are not covered by it - and these make up a growing proportion of purchases.

That leaves businesses such as yours, who rely on the carrier, in the lurch.

To avoid situations such as these, the government did promise in its Queen’s Speech in 2019 to introduce an Airline Insolvency Bill, which would improve consumer protections in a sector that has been no stranger to frequent, high-profile collapses in recent years, such as Thomas Cook and Monarch Airlines.

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New laws would have introduced some significant measures, such as handing the regulator the Civil Aviation Authority the powers to coordinate repatriations as well as a new Flight Protection Scheme for passengers who were abroad while the airline became insolvent, similar to the Atol scheme.

Yet, since those pledges, the government has dragged its heels - despite strong encouragement from the House of Commons Transport Select Committee to implement them. Which? believes that’s a mistake.

The introduction of an airline insolvency mechanism would give passengers, travel businesses, as well as merchant acquirers and insurance providers the confidence to know that they will benefit from financial protection and the guarantee of repatriation should the airline they book with enter administration.

For a sector that has seen consumer confidence in it take a hit over the last few years, those protections ought to be difficult to ignore.

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As the aviation regulator makes progress on reforms of the Atol scheme, it should consider expanding the scheme to cover flight-only bookings to reflect modern consumer behaviours.

It’s deeply regrettable when companies in any sector enter administration - not least because of the likelihood of redundancies. But in aviation, cases such as Flybe’s have not been rare occurrences, but frequent realities. Passengers caught up in them - stranded at home or abroad - deserve better.

Started in 1957, Which? is an independent, non-profit organisation which aims to protect consumers rights.

Rocio Concha Galguera is director of policy and advocacy & chief economist at Which?

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