Airline refunds pose a problem for ‘entire travel industry’

Travel firms operating trust accounts have trouble obtaining airline refunds for the flight portion of cancelled holidays if carriers won’t repay, say industry experts on both sides of the debate on CAA proposals for Atol reform.

Daniel Landen, managing director of trust provider Protected Trust Services, said: “There is no magic wand. Our members struggle to get some money back from airlines.”

The CAA Atol Reform consultation, which runs until August 15, suggests “businesses that have clearly separated customer monies . . . have often been better able to pay refunds for cancelled holidays” during the Covid pandemic.

Alan Bowen, legal adviser to the Association of Atol companies (AAC), agreed: “Without doubt, some have.”

But speaking on a Travel Weekly webcast, Bowen said: “I’ve seen a number using a trust account that couldn’t get funds back that left the account.”

Landen argued: “There has been a significant difference between companies that hold all funds in trust and are able to refund customers and companies that have some sort of hybrid trust model where there isn’t an audit trail.”

He insisted: “We’ve been quite successful getting refunds back from suppliers, especially in the early stages of Covid. We have a small percentage which has yet to be refunded by airlines.”

Landen explained: “We tend to go to the airlines as a block to get funds back. We have the information on which payments have left the trust for suppliers. That allows us to deal with it as a group.”

He conceded: “Our members struggle to get some money back from airlines. We need to pay money out to airlines in advance of travel [and] you always have a risk of the airlines taking the view they’re not going to refund.”

But he said: “This isn’t a trust account problem. This is a problem within the airline industry and how we in the travel industry pay airlines. All types of models have the same problem.”

The Competition and Markets Authority (CMA) announced in June that it is investigating whether Ryanair and British Airways “broke consumer law by failing to offer refunds for flights customers could not legally take”.

The move came after the CMA opened an investigation of airline refunds in December.

Bowen noted: “Ryanair simply said ‘The flights have gone, we’re not refunding.’” He asked Landen: “If money went into a trust account and out to Ryanair and they wouldn’t refund it, would the travel agent give the customer the money?”

Landen told him: “If you can refund 80% of the booking and you have to go to Ryanair to get that [remaining] money back, it may take a prolonged amount of time.

“I’m not saying it hasn’t happened. But this isn’t a problem with the separation of client funds. This is a problem the entire industry has.”

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