UK to copy Germany with new law after Thomas Cook collapse

The government will look at how to deal with future travel firm collapses – though a review was already carried out after Monarch.

New laws will be introduced to prevent travellers being left in a “ridiculous situation” following the collapse of firms such as Thomas Cook, the transport secretary says.

Grant Shapps was speaking after the travel giant went into liquidation earlier this week, leaving 150,000 passengers having to be repatriated to the UK.

Mr Shapps told parliament that he hoped new laws would enable stricken travel firms to be wound down in a “more orderly” way.

What help is available for Thomas Cook customers?

The collapse has triggered the biggest-ever peacetime repatriation of British citizens

He said the government would examine the “reforms necessary to ensure passengers do not find themselves in this ridiculous situation ever again”.

He added: “[Travel companies] need to be able to look after their customers and we need to be able to ensure their planes can keep flying in order that we don’t have to set up a shadow airline.

“This is where we will focus our efforts in the next couple of weeks.

“We will require primary legislation and, dare I say it, a new session of parliament.”

Mr Shapps used Germany as an example, where he said insolvency rules allow for administration to take place but for aircraft to keep flying and other buyers to come in.

He said such a law in the UK would “make repatriation massively easier because we could use those airlines”.

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A review launched after the collapse of Monarch Airlines in 2017 called for a new levy on tickets to pay for the repatriation of passengers when carriers go bust.

When the review was published in May this year, chairman Peter Bucks said: “We know passengers expect to be protected from being stranded overseas if their airline should collapse, but in practice, each year many people fly without such protection.

“Although airline insolvencies are relatively rare, as we have seen in recent months they do happen – and at times have required government to step in to repatriate passengers at great cost to the taxpayer.”

Airlines rejected the levy proposal, however, saying industry costs were already too high, prompting then-transport secretary Chris Grayling to vow “swift” reforms to “secure the right balance between strong consumer protection and the interests of taxpayers”.

Duncan Swift, president of insolvency and restructuring trade body R3, said that while there was a desire to “keep the fleet flying”, there are practical reasons that make this difficult when an airline is insolvent.

He said: “During an airline or travel company insolvency, planes are vulnerable to being held hostage by overseas creditors and suppliers and other stakeholders, which puts aircraft, crew and passenger safety at risk. Using chartered flights avoids this scenario.

“Changing the law in the UK won’t necessarily change the behaviour of creditors overseas. We’re yet to see a convincing solution to this potential problem.”

Shapps says gov will review law so that airlines can be wound up in a more sensible way – currently fleets are immediately grounded. He will find precisely that in the Bucks review, commissioned by last PM after Monarch & gathering dust

— Paul Kelso (@pkelso) September 25, 2019

On Wednesday, it was announced that Thomas Cook’s Polish division Neckermann Polska has been declared insolvent, intensifying the crisis over the group’s collapse.

The Condor holiday flight operation in Germany is safe for now after the government there granted it a £350m six-month bridging loan. Thomas Cook’s unit in Germany, however, has entered bankruptcy proceedings and says it is working with the government to get around 140,000 travellers home, a number reported by the DPA news agency.

Meanwhile, some 120,000 UK holidaymakers who are still stuck abroad have been advised to “enjoy the rest of their stay” amid continuing difficulties over payment demands by resorts.

The message came in an update from the Civil Aviation Authority (CAA), which is leading the £100m UK repatriation effort.

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