Will more airlines follow Flybe into the history books?

It was a genuine case of déjà vu when Flybe cancelled all its flights and went into administration over the weekend. It left nearly 2,500 people stranded on Saturday and about 75,000 with worthless tickets for future dates. A similar thing had happened in 2020, just as the early stages of the pandemic were beginning to affect bookings.

The assets of the failed airline were bought from the administrator and it was relaunched last April only to end in miserable failure less than 10 months later.

Will more collapses follow? What will the effect be on other airlines, routes and fares? And what can you do to protect yourself against losing your money and having your travel plans ruined? Here is our Q&A to help you avoid the fallout.

Why did Flybe collapse?

Quite simply, not enough people wanted to fly on the routes it was offering at fares which were high enough to keep it in business. It focused on UK regional routes where demand has not rebounded as strongly as it has for more popular overseas destinations.

More generally it was operating in a difficult market. UK regional airlines do not have a very robust history in recent years and the airports they serve have struggled to compete with the major hubs in London and Manchester – the problem is a steady decline in demand.

Will other airlines follow?

If history is our guide, then presumably they will. Domestic airlines have failed on a regular basis over recent years. But in the short term, the collapse of Flybe obviously helps its rivals – especially the bigger, more financially powerful ones.

Both Ryanair and British Airways have made a concerted effort to pick up business from passengers left with worthless Flybe tickets, and yesterday the Irish airline reported record profits of €211m (£185m) between October and December.

It said that demand for its summer holiday routes was surging. So that is good news for the health and profitability of airlines – but it will likely have implications for how much we have to pay to fly with them.

Will fares go up?

They already have. Last month the Office for National Statistics (ONS) said that the cost of air fares had risen by 44 per cent in 2022, the largest rise since records began in 1989. And since competition is one of the biggest factors to keep downward pressure on airfares – the fewer airlines there are out there, the more we are likely to have to pay for our flights.

Are consumers properly protected?

Quite frankly, no. There is no structured way of refunding or rescuing passengers who are stranded or lose their money because of the collapse of a scheduled airline.

Atol protects some arrangements. But the rules can be very complicated for consumers to follow, and most passengers on scheduled airlines are not covered by the scheme.

The history of airline collapses and their impact on passengers is a sorry one. Various governments have been promising action since the collapse of Air Europe in 1991. Most recently a major investigation – the Airline Insolvency Review – was commissioned after the collapse of Monarch Airlines in 2017.

It reported in March 2019 with a series of sensible recommendations which the then government, under Theresa May, accepted but didn’t enact.

Since then we have seen the failure of Thomas Cook Airlines and Flybe (twice) and nothing further has happened. As long as the review remains on its dusty shelf, air travellers have no choice but to arrange protection themselves – and most will not realise how vulnerable they are.

How can you protect yourself?

Many travel insurance policies have a provision which will cover you for the failure of a scheduled airline. And if you book using a credit card – and pay the airline directly – you will also be able to claim a refund of the fare – or the appropriate proportion of the fare – paid.

What you can’t protect yourself against, unfortunately, is the cost of buying a replacement flight. And while over the weekend Ryanair and British Airways both offered “rescue” fares aimed at passengers who had been booked with Flybe, passengers with bookings further into the future are likely to have to pay more for the new fares than they paid originally.