Coronavirus: Warning against ‘backdoor bailout’ of travel industry

The money of thousands of holidaymakers must not be used as a “backdoor bailout” of the travel industry, according to consumer champion Which?.

Reports of some package providers refusing refunds running into thousands of pounds in expectation of changes to the law are “unacceptable”, it said.

Abta last night repeated a plea for government intervention to provide emergency funding for UK travel companies which face paying out excessive amounts of refunds to customer holidays which have been cancelled due to the coronavirus.

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The government is poised to confirm suspension of a key part of the package holiday refund rules in line with Abta’s demands.

The legal requirement for travel organisers to refund consumers within 14 days of cancellation could be relaxed to prevent the drain on cash during the current crisis driving firms out of business.

These would see ‘refund credit notes’ issued to consumers protected by the Atol scheme, initially up to July 31.

Which? said while consumers with holidays booked under the current regulations may choose to accept a credit note, their right to claim a refund must not be taken away retrospectively by any changes to the law.

It said it supported the government exploring options to help the travel industry, but its travel editor Rory Boland added: “We’ve heard from hundreds of people who face losing large sums of money because their travel plans have been left in tatters or they have been abandoned abroad and face extortionate bills to get home.

“It’s vital that the government, insurers and the travel sector work together to tackle the huge challenge posed by coronavirus, as the travel industry depends on people having confidence that they will be protected in times of crisis.”

Some travel firms have been issuing credit notes or holiday vouchers to consumers in place of refunding cash.

However, vouchers would not be financially protected if the firm subsequently went bust.

Abta chief executive Mark Tanzer added that the Package Travel Regulations will continue to protect customers’ pre-payments, “as they always have done”.

“But government intervention is required to enable travel companies to continue to operate through a period of unprecedented crisis, and to provide emergency support to customers,” he added.

“Two immediate steps we have asked government for are to allow companies to refund customers over a defined period, during which their payment is protected, and to establish an emergency fund for customers where travel companies cannot recoup the customers’ money from their suppliers.

“Only with these government interventions will we be able to continue to protect the customer interests, and avoid a short term run on travel companies which will trigger failures and delay refunds getting to customers.”

Meanwhile, Which? also called on airlines to respond to the fast-moving situation by informing passengers about the status of future flights, and show flexibility with re-booking options if a flight has not been cancelled.

Insurers must also heed a warning from the Financial Conduct Authority (FCA) about treating customers fairly and work with the government and travel industry on solutions to tackle the coronavirus crisis, as the public must have confidence that they will be covered when they travel.

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