As the economic downturn continues, the industry is united by concerns of how to resolve the issue of consumer financial protection.
How the industry can deal with the fallout from a recession, and its impact on different sectors of the trade, dominated debates at this year’s ABTA Travel Convention.
Within the mainstream travel sector there have already been widespread pleas to extend the ATOL Protection Contribution system to airlines.
From a consumer’s point of view, the ATOL message – who has it, who doesn’t and what this means – is far from clear.
More than half (58%) of respondents to ABTA’s Holiday Survey, conducted by Ipsos MORI, said they did not know or could not remember if their last holiday included financial protection.
Pricewaterhouse-Coopers partner Malcolm Preston told delegates the trade had its work cut out. “The industry needs to do something to dispel the consumer difficulties in understanding what is going on.” he said.
The industry is divided on the issue of protection, with the most conflicting views illustrated at the convention by White Hart Associates partner Chris Photi and British Airways chairman Michael Broughton.
Broughton was adamant airlines should not subsidise other airline collapses under the ATOL system, while Photi called for an increased consumer levy and the scrapping of bonding completely.
Two-tier system
In April the trade introduced a £1 ATOL Protection Contribution to replace the traditional bonding system.
Photi’s inevitable calls for a two-tier levy system at the convention, with consumers paying £2 to protect a holiday and £1 to protect a flight, were backed by All Leisure Group chairman Roger Allard.
Allard – the man called who co-ordinate the efforts to repatriate customers following the collapse of XL Leisure Group – suggested a further tier of £3-£4 for start-up companies.
Photi agreed: “If you want to penalise new entrants, make them pay an extra levy.”
He described the levy for airlines as a ‘sop’ to bring them into the current system and stressed the need for government intervention. “There are some big gaps in financial protection. Regulators cannot do anything; it’s what the government can do.”
Government lobbying
The concern of an uneven system of financial protection was the main topic of conversation because of fears of further failures.
Centre for Economics and Business Research chief executive Mark Pragnell warned the UK will see significant business failures over the next 36 months.
Clearly, the bleak outlook of further collapses justifies fears in the current climate. Following the crash of XL Leisure Group, there have been a string of smaller failures. Bed bank Bluebookonline collapsed recently, and web agency Online Travel Group failed at the end of September.
What is not clear is how and if the trade will put pressure on the government to intervene on the issue of financial protection.
Most reluctantly admit the government is unlikely to show an interest, let alone force the hand of airlines, when its priority is the current banking crisis. So far, ABTA has admitted its attempts to lobby government have been an uphill battle with a “fundamental lack of interest” to date.
ABTA head of development Andy Cooper said the transport select committee remains supportive of its calls for financial protection to be extended, although action has been hampered by the fact parliament has been in recess.
But he said: “This is the best opportunity we’ve ever had to make a case to persuade government.
“The CAA also thinks the time is right. If the government is willing to bail out the banks, setting up a simple financial protection system should be easy.”
He is hopeful the government will start to take action within 12 months and not allow another XL situation in which there is an inconsistent message on protection.
ABTA’s reaction so far to help its cause has been to instigate a ‘book with confidence’ national newspaper advertising campaign to encourage holidaymakers into members’ shops.
ABTA chief executive Mark Tanzer said: “We as an industry have to continue to communicate with customers about when and how they are protected.”
What next?
Cynics point to history to illustrate the fact government intervention is unlikely.
TUI Travel activity holidays sector managing director John Wimbleton is one of the cynics. He believes badgering government is unlikely to reap benefits because the industry is not a top priority for the government and never will be.
Speaking at a briefing during last week’s convention, he said: “In five years we will have another failure and we will have the same problem again.”
The merger of ABTA and the Federation of Tour Operators would give the industry a “better chance” of lobbying for a more level playing field, while the CAA has a “very limited” ability to influence the government, Wimbleton said.
Having experienced previous industry collapses, his cynicism is understandable.
Travel Trust Association managing director Simon Hargreaves’ background in the financial services industry has led him to believe it is better for the industry to sort out its
problems rather than seek government intervention. He said: “We need to take the lead.”
It is not difficult to see their point of view. Governments have consistently backed the airline lobby and the failure of XL was not the disaster it could have been because the industry did such a good job repatriating virtually all those affected.
It is of little consequence some unprotected passengers had to pay for flights home.
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