Final details of the government’s proposal to extend consumer protection to agents are due imminently.
Flight Plus is purported to add clarity on whether consumers receive protection for money paid in advance and repatriation in the event of an airline or travel organiser failing. However, it is plain the real driving force is the need to top up the ailing Air Travel Trust Fund (ATTF) that is £42 million in debt and underpinned by a government guarantee.
It is a minefield for new Secretary of State for Transport Justine Greening, encompassing tax generation, consumer protection, competition issues and increased regulation for micro businesses when it only has the support of part of the industry.
Many insiders believe the consumer-clarity pledges are a smokescreen for the real purpose, which is to fill the ATTF’s depleted coffers by pinpointing an easy target – the online travel agents (OTAs) currently outside the scheme – while raising the barriers to entry for competitors to the big two, vertically integrated companies.
The OTAs have grown quickly at the expense of traditional operators selling packages via brochures and high-street agents. Tour operators argue it is unfair they have to pay the £2.50 per person Atol Protection Charge (APC) and say the OTAs need to be brought into the scheme. There is also a substantial VAT advantage to OTAs, in that they avoid paying VAT under the Tour Operators Margin Scheme (TOMS) – in effect giving a double cost advantage.
It is clear the internet has altered the dynamics of the industry, as has the advent of no-frills airlines. The traditional status quo has been undermined by the OTA dynamic-packaging structure which, while reducing the amount a consumer pays, does not provide consumer protection outside of that provided by a credit card.
Flight Plus seems fair enough in concept, but the devil is in the detail. There are too many loopholes and gaps in the scheme.
Book a flight on an airline website and add hotels and car hire as separate components and you do not have cover under the Atol scheme. However, book identical arrangements on a travel agent’s website and you will be under Flight Plus – unless you book the same arrangements on an agent’s website that sells the flight as an ‘agent for the consumer’. Then you will not be covered.
Book identical arrangements via ‘a click through’ from one site, where you book one component, to another where you book an additional component and you will not be covered either.
Confused? You shouldn’t be. The drafters of the proposals believe they will bring consumer clarity. The reality is consumers will face three types of cover or lack of it – from an agent, a tour operator and an airline.
It is ironic that the big two tour operators Tui Travel and Thomas Cook have lobbied the government extensively in support of Flight Plus, yet withdrawn Atol cover on flight-only sales on their own charter airlines. Neither is paying the Atol protection fee on its own flights.
So the questions are: who is covered exactly? Will these arrangements really top up the ATTF more quickly? How do they provide greater clarity? How will they protect more passengers?
The new secretary of state will have to grasp these issues quickly. There are those in the industry calling for a pause beyond April 2012 and for a re-think. No politician wants TV images of stranded passengers on their watch when the finger can be pointed at newly introduced regulations that were not fit for purpose.
Abta has argued for a considerable time for a single, all-encompassing protection scheme that charges all holidaymakers and air travellers a modest sum – 50p to £1 – on all flights departing the UK. This proposal would be simple. It would top up the ATTF more quickly and more fairly than the Flight Plus proposals, and it would make the fund sustainable in the long term.
The association has been unable to convince successive governments that airlines should contribute to a universal protection scheme and all passengers should be covered irrespective of where or how they book.
The airlines refuse to play ball, arguing that in an industry with high fuel costs, Air Passenger Duty and a relatively weak currency, they don’t need an additional burden. Scheduled carriers also argue they should not need to contribute to consumer protection since there is little chance of their financial failure. But is this reasonable given historic failures such as those of ILG (Air Europe), XL and Globespan?
Travel agents are confused by the proposals. There is a belief they are being rushed. There is concern at the potential for mass avoidance, and I expect to see the CAA in the courts again – having already lost two expensive legal cases in five years. Might it not be wise for the DfT to rethink?