One of the more frustrating aspects of the Thomas Cook Group failure has been the necessity of creating, at short notice, a major UK carrier to repatriate customers, while the leisure company’s fleet remained dormant.
Thomas Cook Group’s fleet comprised around 100 aircraft of which a third was operated by its UK division Thomas Cook Airlines.
FlightGlobal analysis indicates that six Thomas Cook Airlines Airbus A330s and 16 Airbus A321s returned to Manchester and London Gatwick following the collapse.
One A330 and three A321s positioned to Glasgow, while the rest of the A321 fleet, about eight aircraft, were distributed between Birmingham, Bristol, Newcastle and Belfast.
The UK Civil Aviation Authority has been forced to enlist several carriers and around 40 aircraft to repatriate customers of the tour operator, a larger operation even than that required following the collapse of Monarch Airlines two years ago.
Monarch Airlines’ failure spurred a review of preparations for airline insolvency, the findings from which were published earlier this year.
It particularly highlights the problems, within the UK, of continuing to use the fleet of an airline which had fallen into administration.
Operating an airline under such circumstances is “rare”, it states, because airline insolvency in the UK typically results in cessation of operations and grounding of the fleet – a measure intended to avoid loss-making repatriation which would be contrary to the objectives of administration.
“At present the directors of an airline do not have a specific duty to repatriate passengers stranded overseas,” the review points out, and could face liability for “wrongful trading” by operating such flights.
“This means that when an airline is in financial distress their focus is likely to be on the interests of creditors as a whole to whom they will owe their principal duty, rather than on the protection of their passengers.”
Aircraft are “particularly vulnerable” in the case of airline administration, it says, because lessors have an incentive to retrieve their assets and there is a detention risk if aircraft are flown to overseas destinations to pick up passengers.
Paramount Airways was a Bristol-based charter carrier with a McDonnell-Douglas MD-80 fleet. Its failure in 1989 revealed “significant” costs and issues with attempting to keep the fleet running, the review highlights, including the potential for creditors to “frustrate” the operation by seizing aircraft and demanding payment for release.
There are several other considerations which can obstruct the recruitment of an insolvent carrier’s fleet, even if it is being overseen by an administrator willing to undertake a repatriation.
For a carrier to continue flying it needs to retain an air operator’s certificate and operating licence but, under European Union regulations, such licences can be withdrawn if the airline is unable to comply with strict financial criteria, including funding resources and adequate insurance.
The aircraft would also be unable to operate without sufficient crews, which means retaining personnel, and ensuring that suppliers – such as airports, air traffic services, fuel, maintenance and handling companies – are paid during the repatriation, which means funding needs to be put in place quickly.
“Staff attrition in such a situation could still be high, since staff would be motivated to look for alternative employment,” the review points out.
The Civil Aviation Authority could benefit from greater influence over the timing of insolvency proceedings, it adds, in order to mitigate the number of passengers needing repatriation and reduce the risk of an unmanaged collapse or expensive preparation for a failure which does not emerge.
Among the recommendations from the review is the development of a special administration regime for airlines which would provide a limited window for a repatriation exercise.
It says the UK’s absence of necessary mechanisms allowing airlines to wind down and repatriate passengers in an orderly manner contrasts with the situation in “many other jurisdictions”.
Air Berlin’s collapse in 2017 illustrates this contrast, the review states. The German government granted a bridging loan to the carrier through bank KfW – similar to the bridge it is poised to give Thomas Cook Group’s Condor operation – to enable Air Berlin to continue operations while it concluded negotiations to sell assets.
The loan plan and subsequent restructuring were agreed by a panel of creditors allowing Air Berlin to continue operating with a reduced risk of creditor action.
Air Berlin aircraft continued operating until the end of October and the carrier continued offering services through other airlines until its exit in January 2018.
Condor operates around 60 aircraft and is still flying following the Thomas Cook Group failure, as is the Nordic arm Thomas Cook Airlines Scandinavia which has about a dozen jets.