The demise of Thomas Cook has once again focused the minds of policymakers and the industry on the important topic of consumer protection in the event of airline insolvency.
Abta has argued for some time the government needs to step in to bring greater clarity for consumers, and we welcome the commitment in the Queen’s Speech to bring forward legislative proposals.
Two years ago, following the failure of Monarch, I made clear the importance of government taking action to protect consumers before any further major failures.
Unfortunately, this has not been the case and, as a result, the same issues were being discussed and debated when the industry met recently at our latest convention in Tokyo, Japan.
It is positive an independent review into airline insolvency was conducted in the wake of Monarch’s failure, and pragmatic recommendations have been made. But it is now for the government to bring forward, without delay, a full consultation to consider the merits of these proposals.
As the chair of the independent Airline Insolvency Review Peter Bucks recognised, it is a complex issue. However, it is now time to tackle the problem head-on.
Thomas Cook’s demise, and the largest peace-time repatriation of British nationals it necessitated, should provide the impetus to end decades of governments repeatedly failing to confront the need for a comprehensive consumer protection regime.
In the aftermath of Thomas Cook, the government once again decided to repatriate holidaymakers, regardless of whether they purchased a protected arrangement or not. It cannot be workable for this to occur every time an airline fails.
The fact is a blanket approach to repatriation, however well managed (and the CAA did a very good job in that regard), can only serve in the long-run to undermine the package holiday sector; incentivising consumers towards purchasing unprotected arrangements made directly with airlines and other suppliers.
For a new system, Abta has proposed five principles we believe should drive the government’s approach to airline insolvency. These are:
1) Giving consumers transparency and clarity around consumer protection.
2) Preventing market distortions between competing businesses – particularly not allowing a new rule to fall only on UK airlines and travel organisers in a market where consumers are served by carriers from many other jurisdictions.
3) Avoiding duplication of consumer protection costs, and additional financial burdens for businesses currently providing protection.
4) Providing all purchasers of airline seats with equality of protection.
5) Making sure funds are immediately available in the event of failure to pay for repatriation. Whatever solution is adopted, it requires a thorough and detailed consultation with all stakeholders.