Abstract

The Indian aviation sector has witnessed recurring airline insolvencies in recent years, including high-profile collapses like Jet Airways and GoFirst. These events have exposed a critical gap in both national and international legal frameworks that fail to adequately safeguard consumer and investor interests during such financial crises. In this study, we explore the dual impact of airline insolvency on passengers and shareholders, focusing on the lack of enforceable refund mechanisms for consumers and the absence of sector-specific protections for retail investors. This paper analyses the current statutory landscape in India, including the Consumer Protection Act, 2019; the Insolvency and Bankruptcy Code, 2016; and SEBI regulations, and juxtaposes these with international conventions like the Montreal Convention, ICAO standards, and the UK’s ATOL scheme, and examine relevant judicial precedents to demonstrate that existing legal frameworks are ill-equipped to address the complexities of airline insolvency. The research identifies a legislative and regulatory vacuum and proposes targeted reforms, including the creation of a statutory aviation consumer fund, investor disclosure mandates, and a multilateral insolvency response model under ICAO. In conclusion, this paper underlines the need for a cohesive legal response that balances financial viability with the protection of consumer and investor rights in the aviation sector.

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