In the wake of the collapse of Monarch Airlines and Thomas Cook, the UK Government is considering new processes to ensure an insolvent airline's fleet can keep flying in order to repatriate passengers.
However as R3, The Association of Business Recovery Professionals cautions, while the aim is laudable there are practical reasons why this is difficult in an insolvent situation.
The government is considering proposals by an independent commission, including recommendations that airline insolvency procedures prioritise passenger repatriation over repayments to creditors.
While R3 agrees repatriation is practical, unless there is some form of insurance scheme in place, the cost would have to be borne by the insolvent airline. In those circumstances the money spent on repatriating passengers could completely deplete any funds available to repay creditors. A change to insolvency procedures along the lines proposed by the government could mean that trading with or lending to airlines becomes very risky and therefore, undesirable.
During insolvency planes are vulnerable to actions by overseas creditors, suppliers and stakeholders. R3 notes changing the insolvency procedure in the UK won't affect how overseas creditors behave, and that may put the aircraft, crew and passengers at risk.
There is no easy solution to the problems identified.
As with any insolvency, the interests of those on the front line (passengers and crew) have to be weighed up against those of creditors, who are ones ultimately financing the business venture.
In an ideal world passengers should have the comfort of knowing they will be repatriated quickly should the worst happen; however, that may come at the cost of creditors and ultimately their willingness to provide credit or funding.
Among the recommendations is a proposal that airline insolvency procedures prioritise passenger repatriation over repayments to creditors.