fb

ACCA SPRING SALE 25% OFF

Is it the engines, the wings or the Administrator that will keep the airlines flying?

Is it the engines, the wings or the Administrator that will keep the airlines flying?

Earlier this week the European Transport Commissioner relaxed strict rules banning state subsidies for airlines. This follows reports that the cancellation of approximately 100,000 flights earlier this month due to the volcano in Iceland was going to cost the industry in the region of £2 billion.

Inconvenient as the closedown of European airspace was for travellers, the interruption of cash flow could potentially be ruinous for a lot of airlines.  Sadly, this probably means that we could see some seeking administration orders, with a view to helping them trade through the short-term cash flow problems that they are encountering.

But, what exactly is an administrative order?

An administration order under the UK legislation is similar to US Chapter 11 protection, though different in certain key ways.

An administration order is generally sought by directors of a company, who can otherwise be at risk of personal liability if they keep trading without a realistic expectation of being able to pay the creditors.

An Administrator is appointed to oversee the company’s position and to take over management of the business.  As a result:

•    Creditors cannot commence a winding up of the company.

•    The powers of the directors to manage the business are transferred to the administrator.  At the end of the administration, the administrator has the option to reappoint the directors.

•    The directors must produce a statement of affairs for the administrator which will be the starting point for a revised business plan.

•    The administration order is publicised.

The effect is to give the company a chance to stabilise itself, save jobs, minimise losses to creditors and minimise disruption to stakeholders generally.  It’s a very useful device that has saved lots of companies from avoidable bankruptcy.  Hopefully though we won’t see too many administration orders in the coming months.

Share this entry

Recent articles

View All Articles
Nothing to whine about…
Apr 22, 2025
Title
Nothing to whine about…
Excerpt

The wine industry, steeped in centuries of tradition, is experiencing a shake-up that’s sparking debate among enthusiasts and […]

PwC exits 9 African countries
Apr 18, 2025
Title
PwC exits 9 African countries
Excerpt

PwC, one of the Big Four accounting firms, recently announced the closure of its operations in nine Sub-Saharan […]

Using AI to reward staff
Apr 12, 2025
Title
Using AI to reward staff
Excerpt

In a bold move that combines innovation with employee incentives, UK-based law firm Shoosmiths has become the first […]

Barking up the right tree?
Apr 07, 2025
Title
Barking up the right tree?
Excerpt

In a world where businesses are constantly seeking that elusive “wow” factor to stand out, a historic Parisian […]

10 reasons CFOs are leaving…
Apr 02, 2025
Title
10 reasons CFOs are leaving…
Excerpt

Last year, chief financial officers (CFOs) left their roles at the fastest rate in six years, according to […]

Women at the top: EY becomes first Big 4 firm with dual female leaders
Apr 01, 2025
Title
Women at the top: EY becomes first Big 4 firm with dual female leaders
Excerpt

EY has just made history – Alison Duncan will take over as UK Chair of EY, joining forces […]

When Audits Fail: PwC, Wyelands Bank, and the £2.9M Mistake
Mar 26, 2025
Title
When Audits Fail: PwC, Wyelands Bank, and the £2.9M Mistake
Excerpt

What happens when auditors fail to properly understand the business they’re auditing? That’s the question at the heart […]

Volkswagen sells more sausages than cars
Mar 18, 2025
Title
Volkswagen sells more sausages than cars
Excerpt

No, we’ve not made an early April Fools Joke. It’s true. Volkswagen do sell more sausages than cars. […]