Britain to consider airline seat levy to cover costs of failures

By Alistair Smout

LONDON (Reuters) - Airlines operating in Britain should pay a seat levy to cover the costs of getting passengers home in case a carrier goes bust, a government commissioned review said on Thursday.

The recommendations seek to even out anomalies in protection for British travellers, highlighted when Monarch collapsed in 2017, but airlines rejected the review's proposed "airline seat levy" which it said would cost less than 50 pence per passenger.

"Although airline insolvencies are relatively rare... they do happen – and at times have required government to step in to repatriate passengers at great cost to the taxpayer," Peter Bucks, who chaired the review, said in a statement.

British transport minister Chris Grayling said he would consider the proposals by the Airline Insolvency Review, which was set up by finance minister Philip Hammond after the government and the Civil Aviation Authority had to step in to help repatriate Monarch customers.

British holidaymakers who are booked onto a package holiday have what is called Air Travel Organiser's Licence (ATOL) protection, ensuring they can return home and do not lose money.

Monarch, which had both ATOL-protected and flight-only customers, highlighted the discrepancy in British law.

The CAA did not assist in repatriating customers of airlines such as Flybmi when it went bust earlier this year.

Instead, airline passengers often have to rely on their banks, payment card issuers or insurers for refunds, with other airlines often cutting fares in offers to stranded passengers.

The review also suggests that airlines should provide a security to be called on in the event of its insolvency.

But Airlines UK, which represents Britain's carriers, said that any tax would make travel more expensive.

"50p may not sound much but airlines operate on wafer thin margins," Tim Alderslade, its chief executive, said, adding that voluntary rescue fares worked well.

"The chances of booking with an airline that goes bust remain extremely small," Alderslade added.

(Reporting by Alistair Smout; Editing by Alexander Smith)