Interview: ‘Refund credit notes averted many Covid failures’

Refund Credit Notes, along with the government furlough scheme and business loans schemes, were essential to preventing wholesale failures during the pandemic.

 

“All money flows ceased, with refunds due in 14 days,” Abta chief executive Mark Tanzer recalled, saying: “It was simply unachievable. Something had to be done before a wave of lawsuits came in.

 

“We knew once the borders closed [in March 2020], we had to find a solution. John de Vial, our director of financial protection, Simon Bunce [director of legal affairs] and I said, ‘How can we give customers confidence to wait out this period and assurance that if a company fails, they will be refunded?’

 

“We went to the Civil Aviation Authority and spoke to Andy Cohen [CAA head of crisis management], who said, ‘Well, the Atol regulations allow for deferred refunds’.

 

“We said, ‘This is what we need’, then we tried to figure out how it would work – what the documentation would look like, what data needed to be recorded, what would be protected, what the timeframe would be in terms of validity, and what communications were needed.

 

“We were clear this didn’t alter customers’ right to a refund. Where members didn’t accept that customers were entitled to refunds, we spoke to them and a couple left membership. 

 

“We were clear in our communications that customers’ rights were being preserved, that this was a mechanism which would enable them to rebook or have their holiday in future with the protection of Abta.

 

“It was a little while before the CAA followed suit, but they realised they needed to do the same. Andy was very helpful in thinking through how it should be structured. We were able to get cracking immediately. He had to work through the political machinery to be able to follow suit.” 

 

CAA guidance

 

The government informally confirmed in mid-May 2020 that Refund Credit Notes were an acceptable alternative to cash refunds for cancelled holidays, but it was mid-July before the Department for Transport confirmed RCNs for Atol bookings were Atol-protected. The CAA then issued guidance on the credit notes.

 

Tanzer admitted “I wouldn’t say I was relaxed” during this period, noting: “We kept up the pressure on the CAA and government because money was haemorrhaging everywhere. The government was saying, ‘If we do this, what’s the liability we could incur?’ They were thinking about all the other claims being made across the economy. But obviously we wanted this in place as quickly as possible.”

 

He acknowledged: “It was a risk. We didn’t know how long this was going to last or how many companies could fail. We knew if we didn’t do it, companies were going to fail. But we didn’t know how many would come through if we did it.

 

“We lost some valued members. I think we lost 33 out of 1,000. But if you’d asked me at the beginning how many members were going to fail, I’d have said a much higher number.”

 

Tanzer argued: “It’s only when you have a third party like Abta or the CAA saying, ‘If a company goes, we’re here’, that credit notes have any use. Otherwise, all you’re doing is giving a piece of paper saying, ‘Hold tight’. It helped that we have a strong brand which customers recognise and trust. That was a huge help. It was the value of 75 years of Abta.”

 

‘In customers’ interests’ 

 

He noted: “We got quite a buffeting on social media. People said Abta had taken the side of its members. We had to explain that this was in customers’ interests too because, if a company failed, it would a take a lot of time to get refunds and they wouldn’t have a company to rebook with.

 

“I’m sure we didn’t get every step right. But the relatively small number of failures was what we were trying to achieve, and people did get holidays. Loads of people rebooked.”

 

Once the CAA came behind Refund Credit Notes, he said: “The vast majority of customers took them.”

 

Abta has not quantified the value of refunds protected, but Tanzer said: “It must have been in the billions. We had members with £300 million bonds.”

 

He added: “It was so important to have an organisation like Abta in the middle of this, holding the ring.”