Protecting Passengers from Airlines Insolvencies: Joint Letter on the Urgent Need for a Mandatory Insolvency Protection Scheme

In an open letter released today, eu travel tech and ECTAA, together with organisations representing European consumers and insurance providers, urged the European Commission to include in its “better protection of passengers and their rights” initiative an obligation for airlines to provide financial guarantees covering their liabilities towards passengers in case of insolvency.

As it is the case for other providers in different industry sectors, the onus should be on the airlines to cover for the risks stemming from their own activities. For the co-signatories, neither the consumers, nor the taxpayers or package guarantee providers should be made accountable for the poor management of companies.

As pointed out in the letter, sudden disappearances of airlines are not a rare phenomenon and have even multiplied in the recent years. According to a 2020 study by the European Commission, between 2011 and 2019, 87 airlines went bankrupt, affecting 5.6 million consumers. The COVID-19 crisis put airlines’ finances under additional pressure. It is, therefore, not a surprise that, in the current uncertain times in Europe, analysts are still concerned about airlines bankruptcies or serious liquidity issues.

The co-signatories stress that an effective protection of all actors impacted by an airline bankruptcy can only be achieved by introducing a mandatory insolvency protection mechanism in the airline sector. Other measures considered such as encouraging consumers to purchase travel insurance or the appointment of dedicated national authorities dealing with repatriations to remedy the disruptions and financial losses caused by airline insolvencies would not be fair on either consumers or Member States and taxpayers respectively.

“Travel agents and tour operators have been long advocating for the introduction of insolvency protection obligations for airlines, mirroring the existing obligations in the Package Travel Directive. The PTD can be a source of inspiration, as the Commission can take the example of the guarantee fund set up for years in Denmark,” said Eric Drésin, ECTAA Secretary General.

“The creation of mandatory airline insolvency protection should be coupled with the strengthening of the licensing oversight of EU air carriers, but stronger monitoring should under no circumstances replace the need for mandatory airline insolvency protection,” concluded Emmanuel Mounier, eu travel tech Secretary General.