Brussels, 16/10/2009 (Agence Europe) - The European Low Fares Airline Association (ELFAA) took a stance on Wednesday 14 October in favour of strengthening mechanisms to prevent bankruptcy among airlines, rather than compensation measures after bankruptcy takes place. Speaking at the association's general meeting, ELFAA Secretary General John Hanlon called for a preventive mechanism to be established based on surveillance of the financial situation of airlines, mainly focusing on companies showing signs of financial distress.
The idea is a counter-proposal to that promoted by the European Parliament which, in response to the recent bankruptcy of the Slovakian airline, SkyEurope, called on the European Commission to find solutions to protect passengers in the event of airline failure. One of the proposals evoked during the last parliamentary session (7-8 October) by the chairman of the EP transport committee (TRAN), Brian Simpson (S&D, UK), was to establish a reserve compensation fund financed by contributions from airlines, to be activated to help passengers left stranded by the airline. “Our concern is to deal with the problem of stranded passengers in case of airline failure. We have asked the Commission to find a solution which involves all stakeholders from airlines to regulatory bodies in the member states”, said Brian Simpson, chairing Wednesday's general meeting. According to ELFAA, the setting in place of such a mechanism would be against the interest of passengers, as it puts up the cost of services. “It is a matter of preventing consumers' choice and purchasing power”, Hanlon stressed. He commented that a compulsory protection mechanism would be an “unfair burden” on ELFAA's customers and would hamper the ability of airlines to provide the best service at the lowest price possible. He pointed out that, when buying tickets online, passengers already have the possibility to choose an insurance that would protect them against airline failure (European legislation bans companies from selling insurance without explicit agreement from the customer). The same protection is also often proposed during payment by credit card (by way of example, in the United Kingdom, an insurance is proposed for payment above £100). In addition, in the event of failure, the other airlines often suggest assistance for stranded passengers, while a number of indicators, such as cessation of airport tax payments by the company, allow it to be determined well in advance whether an airline has financial problems. For SkyEurope, for example, the question was not that of knowing whether the company would fall bankrupt but rather when it would, said Mr Hanlon during an interview with EUROPE.
According to the EFLAA press release, consultation is ongoing between Parliament and Commission. In his response to the Parliament's question on 7 October, Antonio Tajani said he considered it more appropriate to use instruments that exist already rather than to set new mechanisms in place. The regulation establishing common rules for the use of airline services (EC 1008/2008), which took effect on 1 November 2008, provides for strengthened controls on the financial state of airlines. In the event of a company being on the brink of bankruptcy, controls may result in temporary action, even depriving the company of its license. (A.By.)