As rising fuel prices put pressure on airlines, a new report has expressed concern at the financial security offered to passengers.
The aviation industry is failing to provide passengers with adequate protection if airlines fail, according to a report by the Air Travel Insolvency Advisory Committee (ATIPAC).
ATIPAC, which advises the Civil Aviation Authority, called for an end to the current system in which scheduled airlines are able to operate without offering passengers the same financial security that package holidaymakers enjoy, through the Air Tour Organiser’s License (ATOL) system.
Passengers flying as part of a package holiday with ATOL-protected operators automatically have a £1 charge added to the price of their holiday, which contributes to a regulated insurance fund.
“Airlines are not providing suitable protection. In the event of an airline failing, passengers often have to pay their own repatriation costs and those yet to travel often have to pay for replacement flights”, said ATIPAC chairman John Cox. “This two-tier protection system must not be allowed to continue. All airlines must be brought into a financial protection scheme.”
The news comes in the wake of a report by Blue Oar investments claiming at least 50 European airlines face bankruptcy if the current decline in the aviation industry fails to improve.
Scandinavian carrier SAS, Alitalia, Greek airline Olympic, Polish carrier Lot and Hungarian Malev are said to be under pressure, according to the report.
Rising fuel costs and the worldwide credit crunch have already seen at least 25 airlines go bust this year, including Silverjet, Eos, Maxjet, ATA and Oasis Hong Kong, while EasyJet, Ryanair and British Airways have announced cutbacks in flights this winter and falling profit in the last few weeks.
Three of Europe’s other major airlines – Iberia, Air France and KLM – also announced major drops in profit. Madrid-based Iberia reported a first-half operating loss of more than 32 million euros – a 146 per cent fall compared with the same period last year, while the Air France-KLM group said its pre-tax profits had dropped by 58 per cent in the past three months.
Furthermore, the International Air Transport Association has called for action from airports, unions and governments after it announced a slowing down in the growth of demand for air travel.
Demand in June 2008 rose by 3.8 per cent compared with June 2007, the smallest rate of growth since 2003. European growth in June was just 2.1 per cent, down from 4.1 per cent in May.