Paul Marshall: CAA flying high after a busy week for troubled airlines

Paul Marshall is a partner in Brodies LLPs Dispute Resolution practice.
Paul Marshall is a partner in Brodies LLPs Dispute Resolution practice.
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We often hear that a week is a long time in politics. Well, the UK’s airline regulator, the Civil Aviation Authority (CAA), certainly had an eventful recent week. On 27 September the CAA launched enforcement action against Ryanair for “persistently misleading passengers with inaccurate information regarding their rights in respect of its cancellations”. The CAA is empowered to investigate and, if necessary, take court action in relation to breaches of consumer protection laws.

Earlier in the month, the CAA took Ryanair to task over a statement by boss Michael O’Leary that the airline was not obliged to re-route affected passengers on airlines other than Ryanair. The CAA noted that Ryanair was obliged to do so where it could not accommodate the affected passengers on a suitable Ryanair flight within a reasonable time, and called on it to issue a corrective public statement. When Ryanair made no such correction, and went on to announce the cancellation of more flights on 27 September, again failing to make the clarification sought by the CAA, this was the last straw for the regulator.

The CAA notified Ryanair of its intention to take “expedited enforcement action” against the airline and sought a legal undertaking committing the airline to better communications with passengers on cancellation rights. It reminded Ryanair that if it failed to toe the line, it could seek a court order to compel the airline to change its ways. Ryanair’s response appears to have been immediate, because the next day the regulator’s chief executive, Andrew Haines, said: “It appears that Ryanair has now capitulated.”

A good 48 hours for the CAA, but something bigger was just around the corner. Every UK travel company that sells air holidays and flights is required to hold an Air Travel Organiser’s Licence (ATOL). The ATOL scheme is run by the CAA and funded by contributions from the travel firms. If a company with an ATOL collapses, the scheme protects customers who had booked holidays with the business. It ensures they do not get stranded abroad or lose money.

On Saturday 30 September, with the future of Monarch Airlines in serious doubt, the CAA agreed to extend the ATOL licence of its travel business by 24 hours, so holidays booked on Sunday 1 October were ATOL protected. Events unfolded quickly from that point. Monarch’s CEO Andrew Swaffield explained that the business “left no stone unturned” in its bid to stay in operation but by Saturday evening had concluded that there was no way forward with losses projected at £100 million. He said that while a decision to enter administration had been made in principle on the Saturday, Monarch agreed with the CAA to delay that announcement so that the regulator could implement an emergency flight plan to repatriate UK holidaymakers stranded overseas.

On Monday 2 October, Monarch publicly announced it was entering administration with immediate effect. It has since emerged that Monarch called in accountancy firm KPMG to consider its options more than a month before the decision was announced. The CAA acted swiftly to confirm it had been tasked by the UK Government with the repatriation of all 110,000 stranded Monarch passengers at no cost . This included those whose flights were not ATOL protected. While this move was good news for the passengers, it has led to concerns from some industry quarters that the ATOL scheme has been undermined by the UK Government’s determination to assist all passengers.

Quite a week for the regulator!

Paul Marshall is a partner in Brodies LLP’s Dispute Resolution practice.