3 steps to manage airline bankruptcy risk

How to prepare in case of a carrier going bankrupt.

Flybe was one of the first airline bankruptcies during the coronavirus pandemic. The company was already financially weak but was planning a new future under the Virgin Connect brand, providing regional connections for Virgin Atlantic. Unfortunately, the sudden decrease in demand associated with coronavirus meant Flybe was unable to secure the financial support it needed to make the transition to its new business model.

Although many of the major airlines should survive the storm, with more than 850 airlines worldwide there are bound to be more casualties like Flybe. What can travel managers do to manage airline bankruptcy risk?

Step one

Monitoring airline health is always important, even more so today. Asses the following three risks:

  • Safety, security and sanity standards. Travelers must be safe—now more than ever—during ground transport from their home to the airport, during the flight, in their hotel, and at their destination.
  • Financial risk. It’s hardly possible to get refunds when an airline goes bankrupt on short notice.
  • Service disruption risk. Travelers are at risk of being stuck at their destination with very few options or long delays to fly back home.

Step two

Constantly monitor your travel footprint and program performance. How much traffic do you generate? With which airlines? Advanced business intelligence tools, like our DecisionSource® Reporting and Analytics solution, can help you transform data into actionable insights.

Step three

The third step is to match the airline risk assessment to your travel footprint to analyze your risk exposure. Ask yourself:

  • What’s my exposure to airlines at risk of insolvency in volume and value?
  • Which routes could be the most impacted in case of bankruptcy?
  • What’s my financial risk?
  • What airlines are reliable alternatives to the airlines at risk? Are there other alternative transportation means?

Travel managers should anticipate a shift in airline share in case of high risk to reduce financial and service disruption risk. This requires coordinating with your TMC, and possibly changing online booking tool settings and updating your travel policy. Also consider using a credit card. You’ll have a better chance of recouping money through your credit card company than trying to request money back from an insolvent airline. It’s crucial to develop a communication strategy to keep travelers informed and aware of changes so they can make the right decisions about when and how they should travel.

If an airline goes bankrupt, your first priority is duty of care to support impacted travelers. Other steps to consider are:

  • Rebooking future trips to alternative carriers
  • Asking your legal department for help with refunds processing
  • Negotiating better terms with alternative carriers, especially on routes that will change from competitive routes to monopoly or dominant routes.

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