If the government is not willing to relax refund rules, it should step in to cover the estimated £4.5 billion owed by travel firms, Abta chief Mark Tanzer has told MPs.
Speaking to the transport select committee on Wednesday (6 May) he said if the government wasn’t prepared to extend the 14-day refund window under the Package Travel Regulations, it would have to intervene directly to help businesses cope.
Tanzer said he understood why it was “very difficult political position” to change rules around refunds as it involved consumer rights, which are enshrined in law, but urged Westminster to balance the pain of people who want money back versus those who would lose their jobs.
"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’,” he said.
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".
Tanzer said he believed refund credit notes [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.
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.
Also giving evidence to the committee was The Independent’s senior travel editor Simon Calder, who said clarity on RCNs would be appreciated, outlining how 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," Calder said.
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