Airline passengers are to be taxed 50p on every ticket purchased to bolster the protection available to those left stranded abroad when a carrier collapses.

The proposal to create a formal Flight Protection Scheme is one of the key recommendations made after a review of airline insolvencies commissioned by transport secretary Chris Grayling in the wake of the failure of Monarch Airlines in 2017. The collapse left the Government footing the bill to repatriate 85,000 passengers from around Europe, the UK’s largest peacetime operation of its kind.

A levy of “less than 50p per person” on every fare has been put forward as a way to help fund rescue efforts in such situations, paid for by the airlines but with the expense passed on to consumers. The Civil Aviation Authority (CAA) put the cost of the Monarch repatriations at £40.5million, utilising 60 aircraft from 24 airlines to 33 airports in 14 countries. A similar situation arose in 2008 when XL Airways went bankrupt, stranding 85,000 passengers.

The tax would settle at 40p per fare after an additional 9p surcharge during the first five years of the scheme, the review suggested.

Chair of the Airline Insolvency Review Peter Bucks said: “We know passengers expect to be protected from being stranded overseas if their airline should collapse, but in practice, each year many people fly without any such protection.

“Although airline insolvencies are relatively rare, as we have seen in recent months they do happen – and at times have required government to step in to repatriate passengers at great cost to the taxpayer.

“Our recommendations to government set out a series of practical suggestions to ensure that passengers are protected, particularly in the event of a large-scale collapse like Monarch.

“Ensuring all passengers can get home requires organisation, funding and in many cases more than simply rebooking onto other flights.”

Grayling welcomed the report and said the Government will now look to secure “the right balance between strong consumer protection and the interests of taxpayers”.

The UK’s airlines responded angrily to the news. Airlines UK, which represents 13 carriers, including British Airways, Ryanair and Easyjet, said airlines already face rising costs and now is not the time “to make it more expensive to travel”.

Tim Alderslade, chief executive, said: “50p may not sound much but airlines operate on wafer thin margins and passengers already pay over £3 billion each year to the Treasury in Air Passenger Duty.

“The chances of booking with an airline that goes bust remain extremely small. When it’s happened, airlines have demonstrated their commitment to bringing passengers home through voluntary rescue fares which worked extremely well and without any taxpayer liability.”

In other recommendations, the Airline Insolvency Review said there needed to be an improvement in awareness of how customers can best protect their money when they travel, and that insolvent airlines should be allowed to operate their own planes over the course of a repatriation.