The entry by Flybe into administration is a significant blow for the airline’s customers, employees, suppliers, and creditors. There will also be wider knock-on effects including for many UK regional airports that rely significantly on the airline and on companies that depend on the carrier daily for business travel, writes Arthur Cox Partner Colm McElroy as he discusses the impact of the Flybe Insolvency in Northern Ireland.
Whilst the collapse of Flybe is not unforeseen given its well-publicised recent financial difficulties, its entry into administration has come less than two months after reports that a government rescue package had been secured, including the deferral of part of its annual air passenger duty bill, a move which received heavy criticism from rival airlines.
It has been reported that the carrier had been in talks with the government over a £100 million rescue loan but that the impact of the coronavirus had caused a sharp decline in bookings which caused negotiations to stall.
The collapse of Flybe has occurred less than six months after the shock failure of Thomas Cook and continues a worrying trend in the aviation industry.
Whilst it has been reported that the coronavirus was only one of a number of factors in the airline’s collapse, it raises a wider question about the ability of other businesses in the travel industry (and other susceptible sectors) to withstand another unanticipated headwind with the full scale and impact of the coronavirus not yet known.
This administration will no doubt renew focus on the implementation of key recommendations from Airline Insolvency Review published in 2019 by the Department for Transport. The review was commenced in the wake of the entry by Monarch Airlines into administration in 2017 and proposed a number of changes to the existing UK insolvency regime for airlines to make repatriation of passengers a priority in the event of an airline insolvency.
The review recommended the introduction of a special administration regime which would enable insolvent airlines to continue to operate their fleet for a limited time period to repatriate passengers who would otherwise be left stranded.
The report also recommended changes to the UK’s aviation regulatory regime to allow carriers to continue to operate whilst in administration and to greater equip the Civil Aviation Authority to monitor distressed airlines and provide it with the tools required to affect the outcome in respect of a distressed airline.
It is important for businesses affected by the Flybe administration to take specialist legal advice as soon as possible to appropriately manage the risks implications of the administration.
Arthur Cox is well positioned to advise businesses on the full range of their legal requirements.
