What happens to an Airline that fails an ISO audit?
The same thing that happens to ANY organisation that fails an ISO audit. It looses ISO certification - and maybe a few big-spending customers as well. However, there aren't a lot of airlines that have achieved ISO certification.
I understand that Qantas Engineering had it for a few years - don't know if they still have it, since the events involving them of fairly recent times. I don't think that QF Ops has it though I could stand to be corrected on that, but I was told that they were trying hard for it several years in a row. So, if QF has had problems achieving it, what makes you think it'd be easier for any other airline?