A call for evidence is under way with the review to be chaired by Peter Bucks, the Department for Transport (DfT) said on Monday (April 16).
Bucks will aim to produce a final report by the end of the year.
The review was first raised following the collapse of Monarch last October, which left 110,000 passengers stranded overseas.
It is understood it eventually cost the government, which ordered the CAA to repatriate every holidaymaker, some £60 million and was seen to undermine the Atol scheme.
The operation was the biggest peacetime repatriation exercise, requiring more than 550 flights.
A review was commissioned shortly after the Monarch failure, tasked with examining what reforms are needed to better protect passengers when airlines fail.
It will consider practical repatriation measures, how people should be reimbursed and how to fund any such costs.
Said Bucks: “The Monarch failure showed the importance of passenger protection against the failure of their airline.
“We saw how effective the operation to repatriate passengers was, but the experience also brought home the limitations of the current protection arrangements that we will need to address.
“This call for evidence is aimed at stimulating thinking and sets out the process by which the review will engage with the views of airlines, their passengers and others with an interest.
“We are approaching these complex problems with an open mind and are keen to hear from all with ideas.”
In the AIR announcement, the DfT said the risk to passengers of airline failure was only likely to increase as demand for air travel increases and the “relative proportion” of Atol-protected passengers decreases.
It adds the potential costs of airline failure to passengers was “large” and there needs to be better processes to cover the financial effect of any fallout while minimising government involvement.
The review will also examine the wider lack of knowledge and awareness of relevant passenger protection.
Anyone wishing to submit evidence should email airlineinsolvency@dft.gsi.gov.uk.
