Vol 15 (2018) - Issue 4

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If a Tree Falls in the Forest … Shouldn’t the Saplings in the Clearing Benefit?

Synopsis

In an important judgment delivered in November 2017,1 the English Court of Appeal has decided that an airline’s right to be allocated take-off and landing slots at UK airports under the EU Slots Regulation survives as a valuable asset which can be realised for the benefit of the airline’s creditors after it ceases to operate and enters administration. The judgment is significant in that it prioritises the interests of creditors, ahead of the stated goal of the Slots Regulation of promoting competition within the airline industry, by allowing a failed airline to receive an allotment of slots and sell them to the highest bidder, rather than requiring those slots to be reallocated fairly among other airlines, including new market entrants who would otherwise be entitled to receive half of the slots. The judgment turns on the construction of the Slots Regulation and is therefore significant, not only in the UK, but throughout the whole of the EU.

Background

At the beginning of October 2017, Monarch Airlines collapsed with debts of £630 million, of which £466 million was unsecured. At the time, Monarch was the UK’s 5th largest airline, and the 26th biggest in Europe, operating a fleet of 35 aircraft, serving 43 destinations and carrying many millions of passengers each year. Its failure came after years of mounting financial pressures, caused by competition from other low cost carriers, the long-term decline of the traditional package holiday, increasing operating costs, terrorist attacks and the depreciating value of Sterling. Some 3,500 people lost their jobs. Around 110,000 holidaymakers were stranded overseas, and had to be brought home in what was dubbed Britain’s biggest ever peacetime repatriation. A further 750,000 customers were reported to have paid for flights which they were not able to take.