Much of the travel industry is holding its breath when it comes to consumer protection.
The Civil Aviation Authority is preparing to do battle in court with online retailer Travel Republic, and many companies want to see the outcome of that ruling before taking their next step.
The simplest way forward would be to start from scratch and rewrite the rules on consumer protection, but there are too many parties involved and too much history has gone past.
The travel industry itself is divided about the way forward – supplier failure insurance, ATOL Protection Contribution or a combination of both.
What most players want to see is a level playing field for all suppliers including scheduled airlines, and for consumer to be protected at all times.
However, scheduled airlines have always been very effective at lobbying the government against their inclusion in a protection scheme.
One area where the potential solutions differ is in who pays.
Travel Counsellors chairman David Speakman is a strong advocate for consumers not having to pay.
“Consumers should be protected for everything they buy. ATOL was only ever based on package holidays and they only defined what a package is after 16 years. I can’t understand why there isn’t a system to cover everything.”
Speakman sees the £1 APC, introduced last April, as a step forward but still questions whether customers should be charged at all.
Travel Counsellors does not charge its customers. It holds its holidaymakers’ funds in a trust and foots the bill for insurance for any elements that are not protected.
Lowcost Travel Group director Lawrence Hunt believes that if there has to be protection then £1 APC is the way forward, but only if it covers all airlines.
“Consumers don’t get protection in any other sector – look at the losses in pension funds or when MFI went into administration. It has to be justified and it has to be simple, obvious and a level playing field. The £1 levy is straightforward.”
Others are more in favour of a combination of regulation and monitoring of companies’ trading and some sort of insurance policy.
Hays Travel managing director John Hays said: “I’m not in favour of doing away with regulation but clients want financial protection and to know they are going to get their money back especially in the dynamic packaging era and the current climate. None of the current regimes strike me as adequate.”
Hays Travel insists on its customers taking out supplier failure cover so that every component is insured.
On Holiday Group chief executive Steve Endacott is also an advocate of the £1 APC for all airlines to act as a repatriation fund supported by supplier failure insurance, paid for by the consumer to protect them financially.
“That would simplify the whole thing and give the Government what it wants and the CAA what it wants and remove the necessity for financial checks.”
While the debate continues, the hope is that the CAA/Travel Republic legal proceedings may bring some clarity to the issue, one way or the other.
Endacott said: “I think it is a win-win situation because if the CAA loses it can force the Government to clarify the situation and if the CAA wins then the situation is clarified.”
It is likely be a lengthy process. In the meantime travel companies must continue to trade in a difficult climate with the threat of business failures around them.
Waiting game
The collapse of XL Leisure Group last year has brought the consumer protection issue into focus. The industry wants a solution in the form of the £1 APC levy to apply to all airlines’ seats to bring customers home from a destination in the event of a business failure.
Many travel organisers are urging customers to also take out supplier failure insurance to protect their money in the event of a failure. The industry is awaiting the outcome of legal proceedings between the CAA and Travel Republic for clarification on the issue.
In the meantime, many companies have taken a belt-and-braces approach with ABTA bonding, ATOL bonding and supplier failure insurance. There have been calls for the system to be reviewed as the industry has evolved.
Timeline
- October 1 2003: Small business or mini-ATOL introduced for travel organisers to put together packages for up to 500 passengers a year
- January 1 2006: CAA forced to review its package travel guidance after ABTA victory in the High Court
- July 1 2007: CAA issues draft guidance on the definition of a package holiday
- April 1 2008: ATOL Protection Contribution introduced, operators to decide whether to foot the bill or pass it on. New applicants and companies trading for less than four years still require a bond
- December 1 2008: CAA starts legal proceedings against Travel Republic for breach of the ATOL regulations
- January 1 2009: ABTA relaunches its protection plan that covers agent members against the financial failure of a supplier of all the elements of a holiday
