It’s an ‘embarrassment’ and a ‘disgrace’ that airlines are refusing to pay back customer money and leaving many Atol holders on the hook, according to Travel Counsellors founder David Speakman.
Speaking in one of Travel Weekly’s COVID-19 webcasts, part of a series we are running during this crisis, Speakman likened the way airlines fund operations from customer money to a Ponzi scheme.
He claimed at any one time airlines will typically be holding hundreds of millions of pounds of customer money for un-flown flights and yet now they’re facing refunds they say they don’t have it.
And Speakman said airlines should go back to their shareholders and the banks first to raise money before asking government and the tax payer to bail them out.
“I do think this is unprecedented, but also I think on top of that the industry has been unprepared and it’s lived on very weak foundations over a number of years.
“Customers have paid cash for holidays, and flights, and they just can’t get their money back. It’s amazing.
“Everybody’s saying they are short of money, well yes, but you shouldn’t be short of money. If you’re short of money you go to the bank and ask for more money.
“Have all these airlines who are not paying out, have they gone to the bank? Why are they coming to the government? Why are they knocking on our door as taxpayers?
“You pay an exec to run a business in the bad times, not just the good times. At the end of the day there are all these ways of raising money.
“Banks will check whether you have a viable business, and if you’ve not you fall by the wayside, you close down.
“Then someone comes along and buys the business and probably does a better job because you’ve run it badly. That is what running a business is.
“If you know you can never lose then you are going to do stupid things. And this is the biggest problem, it’s doing it with customer money.”
Speakman added: “The industry, and I’m talking about aviation, lives off customer money. You should be putting that to one side because if you had it you wouldn’t have a problem refunding.
“If you’d put that in a trust you wouldn’t have a problem at all. Where is the customer money gone?
“Executives must be taught that they put money aside for a rainy day. The airlines are holding on to customer money.”
Speakman accused airlines are acting as if they are too big to fail, like the banks in the financial crash of 2008.
“These people think they’re too big to fail. And government has not regulated them properly. Airlines lobby and they say we’ll never go bust. Look at how many airlines have gone bust.
“Most of the American airlines have been in chapter 11 [administration] more than once. But they say we’ll never go bust so don’t bond us, don’t regulate us financially.
“And it’s agents and operators who are on the hook for all this money that the airlines refuse to give back. The ones that finish up with the money we let off and all the others can go to hell.
“It’s an embarrassment and the airlines have put their agents in this position. It’s a disgrace.”
Speakman said a lot of operators were still reeling from the failure of Thomas Cook last October when the coronavirus crisis hit.
And he said this was also a failure of regulating the second biggest tour operator in the UK which itself was holding on to money which was not theirs.
“The second largest Abta member, and Abta weren’t regulating it and they were damaging Abta tour operator and agent members. You have to regulate these people when it’s other people’s money.”
Speakman described the leaching away of consumer trust in the industry because firms are refusing refunds as like a virus itself.
“The losing of trust in the industry is like a virus. It’s in jeopardy. As well as knowledge, really what you are doing when you are an agent or an operator is you are selling trust.
“That you will be there and guide you when there’s a problem, be there 24/7 if something goes wrong and make sure this is the right holiday for you. That is precious.”
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