'Airline IOUs offer customers no security'

Tanzer said there was an important distinction to be made between tour operators putting together flights and accommodation, and what airlines were having to do.

Under the Package Travel Regulations, he said, package holidays are protected so in the event a company fails, there is protection under the Atol scheme for flight packages and with Abta for non-flight packages.

He said there was "consumer confidence there" that people will get their money back, stressing this was not the same with airlines.

Tanzer said he was keen for airlines to uphold their EU refund requirements, stressing airline "vouchers" don't come with any protection. "They are essentially an IOU to the customer that says at some point, you will get your money back."

Tanzer said if an airline fails, there is no security for customers. He also said money was not flowing back down the chain from airlines and accommodation providers making it very difficult for tour operators to offer refunds.

"That's what's created a real cash crunch for the travel agent and tour operator sector," said Tanzer, reiterating these businesses were, as a result, not in a position to pay refunds within 14 days.

'Travel about selling dreams'

Calder told the committee it was important to understand travel wasn't like other industries, with companies "selling dreams" so customers commit money months in advance and effectively take delivery of their purchase at the airport.

He said it was therefore critical people knew whether they were going to get their trip or their money back.

He highlighted Trailfinders' trust account model as an example whereby the business has been able to hand back case "pretty easily", adding a lot of trading in travel went on "using travellers' cash".

'What needs to happen next?'

In response to a question from Smith about what government should do next, Tanzer said the Foreign Office's mid-March advice against all travel had "created a complete shut down of travel industry revenues" and triggered "worldwide cancellations" meaning refunds had to be paid under the PTRs.

"What we saw then was a crisis the industry has never seen and that the legislation wasn't prepared for," said Tanzer, adding Abta observed "a range of different behaviours from different travel companies".

This has ranged from companies refusing refunds outright saying the situation was so extraordinary contracts were basically null and void to some partial refunds and advice to seek recompense from airlines and travel insurance providers.

"We saw people issuing deferred credit so what Abta did was step into the middle of that and bring some kind of order, said Tanzer. He explained Abta made clear to members they must give some kind of refund, and should engage with customers, not ignore them.

Tanzer said Abta issued guidance on so-called "refund credit notes" with a defined time limit whereby customers can get a cash refund for the original amount, with these notes protected by the Atol scheme and Abta so if a company did fail before a refund is paid, customers will get their money back. Tanzer described it as a way to "bring confidence" to the market.

He said it was mutually beneficial in so much as it gave companies a chance to survive, and didn't place excess burden on the Air Travel Trust Fund in the event of failures.

"We thought if we could encourage people to take deferred refunds that are protected, that would be the best solution," said Tanzer.

'CAA must make protection explicit'

Tanzer stressed that as the majority of refunds would be under the Atol scheme, Abta engaged with the CAA "very early" and got "verbal confirmation" the scheme would cover deferred refunds.

"It is really important the CAA comes out and says this explicitly," said Tanzer. "We believe it is the case, legal advice says it is the case, and for whatever reason, the CAA hasn't said that."

He said the government, through the CAA and Atol scheme, should confirm they are standing behind deferred refunds. "It's in everyone's interests to have confidence in these schemes," he added.

'We need to consider the whole model'

Calder said clarity on RCNs would be appreciated, and said government could assist the situation in a number of ways.

Firstly, by looking at whether it should inject liquidity into the travel sector to protect firms and jobs and ensure a healthy, competitive sector in future.

Secondly, he said there needed to be "a lot of consideration" given to whether the government and the sector should look at reforming current financial protection and refund models.

"There needs to be a lot of consideration about whether we look at the whole model afresh," he said.

'Right to refund absolutely still exists'

Tanzer said he believed RCNs were a "very important part" of the solution to the crisis facing travel, and stressed contrary to questioning from the committee that Abta has never said customers are not entitled to a cash refund.

"We are completely in line with the CMA [Competition and Markets Authority] that that right exists," said Tanzer.

He said Abta had asked government to extend the 14-day window under the PTRs in which companies must give a refund to give them "a bit more breathing space".

He also said Abta had given "lots of evidence" to the Department for Business, Energy and Industrial Strategy on why this was important, but flagged the department "hadn't seen fit to move yet".

"The right to a cash refund is still there," said Tanzer, who said consumers should talk to their travel providers about the situation.

He added the obligation was still on travel companies and Abta members to pay refunds "as soon as possible", but warned while this must be "fair", it would depend on individual company circumstances.

'Businesses are working 18-hour days on this'

Tanzer said if people lose confidence in the RCN regime and drive for cash now, there would be a "real problem" within the travel industry. You will see a lot of companies fail," he said.

"I'm talking to people whose businesses, which may have been running for 20 or 30 years, are at the point of closing down. Others are working 18 hours a day to try to keep thousands of employees in jobs. This isn't crying wolf, this is what will happen because there is no cash until it comes back from suppliers."

Tanzer said he was fearful this would damage the sector, taken longer for customers to get their cash back, and risk delaying the sector's recovery as there "won't be travel companies there" to pick up future demand.

"It is in no one's interests for travel companies to fail at this point."

'If govt walks away, it will knock over a lot of travel companies'

Tanzer said if the government wasn't prepared to extend the 14-day refund window under the PTRs, it would have to intervene directly to help the second.

He said he understood why it was a difficult political decision as it involved consumer rights, enshrined in law, and trying to balance the pain of people who want money back versus those who would lose their jobs. "It is a very difficult political position," said Tanzer.

"I think frankly, if the government doesn't want to do that, the way to save travel companies and jobs is for government to intervene directly through a properly administered system to say 'we will pre-pay those refunds where companies can't'."

Tanzer said the advantage of this would be that travel companies survive to administer payments, and then could repay government further down the line.

However, he said if government walks away altogether from what is a £4.5 billion demand for cash, it would "knock over an awful lot of travel companies".

What would be the effect of a two-week quarantine?

In response to a question from MP Grahame Morris on the effect of a potential two-week quarantine requirement for passengers arriving in the UK, or returning to the UK, Tanzer said the industry would follow the government's lead as it does on all security and health matters.

"If quarantine is the way to go, we will follow and work with it," he said, stressing to mitigate the hit, it would be good to know exactly what quarantine would entail.

"I think it's not clearly understood, as a term, what it would mean for customers," said Tanzer, with possibilities ranging from lockdown in homes to returning to follow social distancing rules.

"It's important we are clear about this and how it fits with other public health measures we are already taking – testing, apps, etc. How does this fit into an overall lifestyle picture that people can understand and make decisions about travel."

Tanzer said any such measures would "clearly" have a detrimental effect on travel. "I think it's clear people will be reluctant to make business trips or short trips if they feel they are going to have to be isolated," he said.

He said logistics would be an issue, questioning whether passengers would be immediately quarantined at airports, and how they would get home. "We need to think through all of this and how testing could mitigate or alleviate some of the consequences of quarantine," said Tanzer.

"Until we know exactly what the government is contemplating, it's difficult to say how we would react to mitigate it."

Calder added that if there was a 14-day mandatory self-isolation at home in the UK for inbound or returning passengers, it would effectively "wipe out" overseas travel for British people for so long as it is enforced.

"Who is going to go to Benidorm for a week and then face two weeks self-isolation at home while lockdown is gradually eased for everybody else?" he said.

Tanzer: 'Three main ways to help agents'

MP Robert Largan MP asked Tanzer what the future was for travel agents, and what extra support was needed to "make certain" agents and the "huge number" of jobs in the sector were still there after the pandemic.

Tanzer said he felt there were three main considerations. Firstly, with there likely to be an underlying appetite for travel that may even intensify following the lockdown, it was vital the Foreign Office made sure its travel advice was up to date and accurate.

"Destinations are going to open up at different rates," said Tanzer. "We are already working with them to understand what are the restrictions in place and the health provisions if someone gets ill.

"So I think there is [going to be] some very intense work for the Foreign Office to ensure people are confident they can travel safely to the places they want to go."

Secondly, Tanzer said it was vital travel companies survive the crisis to offer trips for agents to sell. He said getting them through the cash crisis, refunds and any potential quarantine measures would be really important.

He also said the government could look again at the furlough scheme. "We are grateful to the government for the early intervention on employment in terms of furlough. For the travel sector, it hasn't been an unqualified success.

"The reason is that we need to have people working. Having the binary situation where they are wither completely off work in order to qualify for furlough, or they are on, doesn't work.

"In terms of dealing with refund requests and helping customers, a more tapered furlough scheme where maybe 50% could be paid by government and 50% by companies to help get people back to work while we are building up the book of business again would be really helpful."

Tanzer added the third consideration was consumer confidence, which he said will undoubtedly have taken a knock amid the crisis, particularly with the insurance market "pulling away" from the travel sector.

"I think the government needs to work with the insurance industry and the ABI [the Association of British Insurers] to bring them back, to give customers cover where they are travelling, and give them confidence – that will help travel agents."

He also returned to the topic of a wholesale review of financial protection in travel.

"We've called for government to look at the whole question of airline insolvency, [and] the protections that are available if an airline fails. We've seen airlines can fail, and are at risk of failing, and there is no consumer protection. So when we're through the immediate crisis management, we need to look at some of those longer-term structures.

"I think all of that, the Foreign Office advice, getting companies through, and rebuilding consumer confidence, will be what helps travel agents most."