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IATA calls for review of bankruptcy laws to lessen incidents of stranded passengers

The International Air Transport Association (IATA) has called for countries to take a second look at bankruptcy regulations to lessen incidents involving stranded passengers.

However, the industry trade body said no to a proposal of a rescue fund that would repatriate customers.

The call stems from some high-profile airline insolvencies that happened in Europe last year.

Britain’s Monarch and Germany’s Air Berlin both belly up last year. However, the process that the two carriers went through varied.

Air Berlin was able to stay afloat for a little over a two months due to a government bridge loan while it looked for buyers for its operations. Monarch’s right to fly on the other hand, was immediately withdrawn, leaving thousands of passengers stranded and staff put out of work.

IATA said that there should be a “reasonable timeframe” with which airlines could continue its operations after entering insolvency to let passengers complete their respective journeys.

“It is up to member states to look at ways to better manage a bankruptcy,” said Monique de Smet, Director EU Affairs at IATA.

Last month, the European travel agents and tour operators’ association remarked that the EU Commission should launch a binding mechanism to safeguard passengers against airline failure, with the cost being shouldered by carriers and inserted into ticket prices.

But the IATA balked at the idea, and said that a rescue fund is not necessary, as it would simply twist competition. The trade organization also stressed that its members in Europe have already established a voluntary agreement to offer rescue fares to those that need it in returning back home.

“This was used a lot with the Monarch case. If passengers are stranded again tomorrow, we already have a tool that works well,” de Smet reported.

Repatriating over 100,000 Monarch passengers reportedly cost the British government an estimated 60 million pounds ($83 million). The German government loan that helped Air Berlin remain operational for two months was for 150 million euros ($184 million).

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