UK: Let's Fly Away…..

In the holiday season many of us jet-set to foreign shores – but do we ever think about how we might get home if our budget airline goes bust or are we just hunting for the best deals to make the pound stretch further?

The last decade has seen a number of airlines collapse or be swallowed up by competitors:

Following the collapse of Monarch last year, over 110,000 passengers were stranded abroad and the Government launched an operation to replace the flying programme for two weeks to repatriate customers, at a cost of approximately £60 million. At around the same time the German government was mounting its own programme to keep Air Berlin flying to avoid similar impacts for its passengers. Following these events, the Government issued a consultation paper on airline insolvency and the Airline Insolvency Review Interim Report was published on 12 July 2018 (to read the full report please click here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/724883/airline-insolvency-review-interim.pdf.).

The review was established to determine the extent to which it is appropriate to protect passengers from the impact of future airline insolvencies and how to minimise the impact on the taxpayer.

The review details that the airline industry is one that has seen 'considerable change over the last few decades as regulatory reform and liberalisation has increased competition and reduced prices'. It estimates that the risk of further airline failure in the UK market remains around 25% in the next 15 years.

The UK aviation market is concentrated in the top 3 airlines (EasyJet, British Airways and Ryanair) with the rest of the market comprising a number of smaller airlines. However, even the major airlines have hit the press recently as they have been significantly affected by the recent air traffic controller strikes. EasyJet have estimated that the strikes have cost the airline £25million and accordingly they will be lodging a complaint with the European Commission, following similar action being taken by IAG (owner of British Airways) and Ryanair.

The recent air strikes, together with the unusually hot British summer, are likely to have had an effect on demand for 'last minute' bookings. Despite this, it seems that EasyJet in particular still have an optimistic outlook. It was reported that the airline has raised its full year profit outlook to between £550 million to £590 million due to the strong demand for seats. Such demand is in part attributable to EasyJet taking over some of Air Berlin's services following its collapse last year, however, it still demonstrates the demand for a cheap getaway/cheap business travel.

The advice to passengers is still to travel but not to "have your head in the clouds". Whether you are protected on your holiday mainly depends how the travel is booked. In general, purchases of accommodation and flights result in the creation of a 'package holiday' which in the UK is subject to ATOL protection. Other protections can be dependent on the method of payment used for your travel services or the terms of your travel insurance. If booked on a credit card in the UK, usually the card company is jointly liable for the provision of services. Equally, some travel insurance policies include supplier failure cover, but not all do. Whilst airline insolvency is relatively rare, neither the passenger nor the government/taxpayer want to be left footing the bills if an airline does "fail to take-off".

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