UK Air Passengers Set To Pay An ‘Airline Bankruptcy Tax’

A UK government review published on the 9th May has recommended Britain sets up a ‘Flight Protection Scheme’. The scheme would see all air passengers paying a 50p levy to finance their repatriation should their airline go bust.

Flight Protection Scheme
The Flight Protection Scheme would get you home if your airline goes bust. Photo: Pxhere

Air passengers in the UK may soon be charged an extra 50p per flight to maintain a new Flight Protection Scheme. The scheme will involve all airlines to buy into an ‘insurance’ scheme, which can then be used to repatriate passengers in the event that the airline goes bust.

This has come about following the publication of the Airline Insolvency Review which was published today (Thursday 9th). The review revealed that as many as 80% of UK passengers travel abroad without ATOL protection or any other way of getting home if their airline goes bankrupt.

The response from the UK’s aviation sector has not been good. Airlines UK, who represent 13 British carriers including easyJet, British Airways and Ryanair, have said that airlines are already facing enough rising costs and that now is a really bad time to make air travel even more expensive.

British Airways’ owners IAG also slammed the proposals, telling the Guardian that they should “not be charged a levy to bail out other carriers”.

The Airline Insolvency Review

The Airline Insolvency Review was originally implemented by the Department for Transport (DfT) back in 2017, following the collapse of British airline Monarch. It hoped to identify ways in which passengers could be protected better in future, in the event that another airline should collapse.

Monarch airlines stormy skies
The collapse of Monarch cost the UK £60m. Photo: Wikimedia

The collapse of Monarch Airlines was a disaster for the UK. At the time, the government was facing in the region of 85,000 British citizens who were stranded in foreign countries with no way to get home.

Rather than leave them to find their own means of onward transportation, the UK government themselves decided to repatriate everyone. The total cost of this was £60m, according to the BBC, which adds up to more than £700 per person. Following the incident, the government managed to get around £20m back, but the taxpayer had to subsidize the rest.

This was when a senior financial advisor, Peter Bucks, was asked to step in and find ways to handle any future airline collapse better. Preferably without the government getting involved. This move was called the Airline Insolvency Review.

The recommendations

The first thing Bucks recommended was to set up a ‘Flight Protection Scheme’, which would create a pot of cash to be used in the future if an airline went bankrupt. This would be delivered in the form of an insurance policy, which every airline would have to buy into.

He also recommended that there be some sort of failsafe mechanism set up to prevent airlines from just stopping flying. How this would work, he hasn’t figured out yet, but the idea would be that any collapsed airline would keep their planes in the skies long enough to get everyone back home again.

Air Berlin
Germany stumped up the cash to stop the collapse of Air Berlin ruining everyone’s summer. Photo: Wikimedia

We’ve seen this sort of thing actually work very well in practice. For example, when Air Berlin were clearly going under, the German government pumped in around £130m of much needed cash so they could maintain operations until the end of the summer.

As a finite figure, this was more expensive than the Monarch rescue. However, if you consider it on a cost per head basis, it was far cheaper and a much better solution all round.

The Flight Protection Scheme

On the face of it the Flight Protection Scheme looks like a fairly reasonable idea. The ‘insurance’ required by airlines is estimated to add around 50p to the cost of each ticket. That’s a minor amount by anyone’s calculation, and probably won’t even be noticed.

However, when you think about it, it makes no sense at all. Most British travelers use BA, easyJet, Ryanair or Jet2 for their trips, all of whom have excellent financial credentials. This means that the majority of travelers who help fund the scheme would be highly unlikely to ever see any benefit from it.

WOW air Airbus A330
When WOW collapsed, other airlines stepped in to get people home. Photo: Wikimedia.

Then there’s the fact that, perhaps, it’s just not necessary. When WOW Air suddenly ceased operations earlier in the year, no less than 13 other airlines stepped in with ‘rescue fares’. There was no order from the CAA to do so, no government was involved; it happened because of voluntary industry agreements and a general sense of duty.

Another issue comes in the form of airlines who are grounded but not declared bankrupt. It’s an unusual situation, but one we’ve seen recently with Jet Airways, who have left thousands of British travelers stranded in India. Because they’re not bankrupt, the Flight Protection Scheme wouldn’t apply.

There’s also the issue of people who book on two different airlines to fly, something we at Simple Flying tend to go out of our way to do (just to get the comparative experience, if nothing else). If you left on Ryanair but had a ticket back with TAP Portugal, for instance, the Flight Protection Scheme wouldn’t cover you.

What do you think? Is the Flight Protection Scheme a good idea, or simply unnecessary? Will you be happy to pay the extra 50p?