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UK sets out plans to overhaul airline insolvency process

New UK legislation is to be put forward to reform the airline insolvency process in order to protect and repatriate passengers more effectively, as well as enhance regulatory oversight of airlines in distress.

Details of the proposed bill have been disclosed by the UK government following the formal state opening of the country's parliament on 14 October.

Reforms had been recommended by a government review conducted in the aftermath of Monarch Airlines' collapse in October 2017, but have been lent greater urgency by the failure of Thomas Cook Group in September this year.

While the UK's head of state, Queen Elizabeth II, referred to an aviation bill during her formal opening speech, in which she read the government's list of proposed legislation, she mentioned only that the bill would provide for the "effective and efficient management" of UK airspace.

But the government has detailed accompanying airline insolvency legislation which aims to "strike a better balance" between strong consumer protection and the interests of taxpayers.

The inability to use the Thomas Cook Airlines fleet for repatriation emerged as a particular issue in the days after the collapse, forcing the Civil Aviation Authority to enlist multiple carriers to source sufficient capacity.

Under the proposed legislation the authority would be able to "mitigate the impacts" of a future failure, says the government.

The changes will provide the CAA with the ability to grant a temporary airline operating licence allowing the carrier to continue repatriating passengers after insolvency.

Introduction of a special administration regime, for airlines and tour companies, will keep aircraft flying long enough for passengers to be fully repatriated and supported.

The CAA's remit will be extended to apply to repatriation of passengers whether they are protected or not under the ATOL air travel scheme, which was set up in 1973 to refund and return passengers in the event of an airline failure.

But the government cautions that there is no "silver bullet solution" and that a transition period might be necessary to enable the industry to adapt.

The broader aviation bill – aside from the insolvency amendments – will additionally provide powers to direct an airport to prepare and submit proposals to the CAA to change airspace design, to make flights more efficient.

Air traffic control licensing frameworks will be modernised and police will be given additional powers to tackle unlawful use of unmanned aircraft.

Despite the legislative declaration, the UK government does not command a majority in the lower house of parliament, which means the likelihood of progress for the proposed aviation bill is uncertain.

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