Clause 94 - Regulation of provision of flight accommodation
Civil Aviation Bill
Julie Hilling (Bolton West, Labour)
Amendment 83 would bring airlines into the ATOL scheme without the need to wait for secondary legislation. There is no argument that the scheme is badly in need of reform. When it was introduced, 97% of holidays were protected compared with only 50% now, and there is great confusion about who is covered.
Three passengers sitting side by side on the same flight, going to the same hotel and having the same car hire, might all imagine that they would have the same protection, but in reality, they might not. If the first person booked their holiday through a traditional travel agent, it would be fully protected. Providing that the secondary legislation on the original ATOL scheme is passed in April, if the second person booked their flight themselves and then booked their accommodation with an agent or tour operator, they, too, would be protected. The third person might be on the same flight with the same pluses, but if they booked their holiday direct through the airline, they would have no protection whatever. It seems to me that if it looks like a package and feels like a package, it should be treated as a package.
The situation can be even more confusing: if, for example, someone booked a Virgin flight and a hotel through the Virgin website, they would be unprotected, but if they were transferred through that system into Virgin Holidays, they would have protection.
Even travel agents are confused in some situations. Usually, travel agents act as the agent for the supplier, so I think—I could be wrong, because this is totally confusing—that the travel agent books a package put together by a travel trade supplier. Sometimes, however, the travel agent might put together a package for the holidaymaker, so it then becomes an agent for the consumer. In such cases, the holiday is not covered at all. Research has shown that even travel agents do not know whether they are acting for the consumer or the supplier. If they do not understand whether holidays are covered, how on earth is the person purchasing the holiday to know whether they have ATOL protection?
When we took evidence in the Transport Committee and, I believe, in the Bill Committee, some witnesses said that we did not need to extend protection, because people were protected when they had booked their holidays using a credit card. I do not think I have ever booked a holiday through a credit card, mainly because in doing so, I would be charged extra costs. More and more people are using debit cards. Nevertheless, the witnesses who argued against extending ATOL because people were using credit cards could not provide evidence of how many people would and would not be protected. They recognised, however, that there might be a problem and that some people would be unprotected because they would not be protected through their card.
Insurance is another issue. Responsible travellers get their travel insurance when they book their holiday and ask for details of their insurer when they do so. However, that insurance does not cover airline or travel company failure; only specific insurance does that.
The airlines have asked why they should be brought into the matter, but it is airline failures in the main that have caused people to draw on ATOL funds. Back in 1974, Court Line failed because of problems with the oil crisis and the parent shipping line, which impacted on Clarksons Holidays, and led to the creation of the ATOL scheme.
In 1982, Laker Airways collapsed, taking its subsidiaries, Aerosmith Holidays and Laker Holidays, with it. In 1991, in the midst of the uncertainty of the Gulf war, Air Europe went bust, taking down the International Leisure Group, which included such companies as Intasun; we will all be terribly upset to know that it also took down Club 18-30. At the time, ILG was the UK’s second largest operator.
Best Travel Group, which included Ambassador Airlines, ceased trading in 1994. Since then a number of other airlines have gone bust, including the XL Leisure Group, the Globespan Group, Kiss Flights and Freedom Flights. A substantial amount of money paid from the air travel trust fund was in response to airline failure. In the past three years, 51.2% of all claims on the fund have been as a direct result of airline insolvencies.
The collapse of XL Leisure showed that the ATOL system is no longer fit for purpose. When the CAA began repatriation and refund processes, it became clear that it was possible for two holidaymakers to have booked identical holidays and for one to be fully financially protected and the other to have partial protection or no protection at all. That was seen again with the failure of Goldtrail and Kiss Flights. The XL failure also demonstrated that it was extremely difficult to run an efficient refund scheme, because of the ever-increasing complexity of agents’ paperwork and the difficulty for the CAA in judging whether the claims were valid.
For airlines to argue that they should remain outside ATOL seems wrong—wrong because it is frequently the failure of airlines that draws on the air travel trust fund and they should therefore be paying into it, and wrong because passengers need to be clear when they are covered and when they are not. It is also wrong because if passengers cannot pay for repatriation, someone has to: the fund, another airline or the taxpayer. The airlines have also argued about competition. Again, there should be a level playing field for all people selling holidays. I can understand why an airline does not want to be brought in and wants to pay any extra money out when it has to. However, it just seems only fair that airlines should be brought into the scheme.
We all shop around for our holidays; if I am honest, I chose the last holiday I booked because it was £5 cheaper. We get down to very small margins when we book a holiday. However, the cost of ATOL is £2.50 for each booking, and that should be applied without delay. If we are to have an open and competitive scheme, there should be that level playing field and those taking money out of the fund should be paying into it. That would also put the trust fund back on to a strong financial footing; the fund is in deficit at the moment. That would provide clarity for travellers and it should be done now. I do not understand why we are waiting for secondary legislation when we have a perfect vehicle for primary legislation going through the House now.
I have a little worry that my amendment will not be accepted; I cannot understand why I might feel that. I want to finish with two questions. First, will flight-plus be introduced in April? Secondly, if the Committee does not accept my amendment, when will the secondary legislation be brought in so that airlines are incorporated into the ATOL scheme?