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Insolvent Airline Triumphs in Airport Flight Slots Test Case

Creditors of a collapsed airline will be better off after the Court of Appeal ruled that it retained its identity as an air carrier even after it became insolvent. The ruling meant that the airline was entitled to be allocated valuable airport flight slots for the summer season despite having no aircraft and no flight crew.

Shortly before it went into administration, the airline had sought allocation of the slots under Council Regulation (EEC) No 95/93. As an established business it took historic precedence in the queue for such slots. The request was, however, refused on the basis that it had ceased to be an air carrier.

In rejecting the airline’s judicial review challenge to that decision, the High Court noted that its operating licence had been revoked by the Civil Aviation Authority and that there was only a theoretical possibility of it emerging from administration as a going concern. It no longer had any aircraft or active flight crew and did not pretend that it envisaged using any of the slots itself.

In upholding the airline’s appeal, however, the Court of Appeal found that it remained an air carrier, as defined by the Regulation, notwithstanding its insolvency. As a matter of ordinary language, a collapsed airline, even one that had no realistic prospect of resuming flight operations, was still an air transport undertaking for the purposes of the Regulation. The Court concluded that the airline was entitled to be allocated slots that it could trade at a profit in the established secondary market.

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