Examination of Witness

Civil Aviation Bill – in a Public Bill Committee at 1:58 pm on 23rd February 2012.

Alert me about debates like this

Mark Tanzer gave evidence.

Q 159

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Good afternoon. Would you identify yourself please?

Mark Tanzer: Hello. My name is Mark Tanzer and I am the chief executive of the Association of British Travel Agents.

Q 160

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

Would you explain why ABTA is supportive of moves to extend air travel organisers’ licence protection to more holidays and more consumers?

Mark Tanzer: I am sorry, the door just shut. Could you repeat the last bit?

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

It would be good to hear your thoughts on ABTA’s views about proposals to extend ATOL protection to more holidays, and therefore more consumers.

Mark Tanzer: ABTA is very supportive of that move. We believe that consumer protection for holiday sales is important to both the industry and customers. It is a product that needs those protections. As I am sure the Committee is aware, the traditional model of package holidays, which were protected, has become a shrinking part of the market, which has resulted in a lot of consumer confusion about whether they are covered.

The reality is that a lot of people are travelling without such protections, so we have, through consultation with our members—a lot of whom will be coming into this protection regime for the first time—been pushing for the extension. We are very keen that, as provided for within the Bill, holiday sales by airline are also brought in as soon as possible.

Q 161

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

Yesterday, in the Select Committee on Transport, I was asked, “Why don’t you just ask consumers to get insurance and sort themselves out?”  In your view, what would be the downside of a situation that was entirely dependent on consumers seeking out travel insurance to cover themselves, in relation to insolvency of tour operators or other providers of holidays?

Mark Tanzer: They will not, is the first point. Unless you make it a statutory obligation like car insurance, our evidence is that people will not take out that additional insurance. If it does go wrong and they are stranded overseas it becomes a problem for the industry, the Government and everyone else. Ultimately, the Government must have a mechanism for repatriating people who have not taken out insurance. Travel insurance policies at the moment cover a huge variety of different things, but they will not typically provide against the failure of your travel organiser.

You would have to have a much bigger pool of proper insurance policies there for the customer to choose from. In the long term, the issue of consumer protection could be handed back to the markets, with a mixture of bonds and insurance policies and so forth, together with the travel organisers. However, I would be sceptical about whether each individual customer, given responsibility for protecting themselves, would actually do that.

Q 162

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

Obviously, the Bill’s provisions are particularly focused on giving the Government power to bring airlines in at some point in future, if the appropriate impact assessments and so on indicate that that is the right thing to do. What is ABTA’s view on whether airlines should be part of the ATOL scheme?

Mark Tanzer: We very much believe that they should be. The fact that they are airlines is secondary to the fact that they are selling holidays. A flight and a hotel is a holiday, whether it is sold by an airline, a travel agent or a tour operator. Not having them in the scheme will, first, leave a lot of people outside protection—which we think is a good in itself—and, secondly, will create a competitive imbalance between those who are providing protection and the airline holiday sales, which are not.

That is not an issue for members only in terms of competitiveness; it will have the effect of driving customers towards the unprotected segment. Particularly on the internet, the way in which holidays will be racked up in terms of screens will be the cheapest at the top. Of course, if you are an airline selling holidays and you are not carrying the cost of protection, your holidays will come higher up and you will get a larger share of the market. The perverse result of not having them in will be that even more people will be driven towards that sector, where we do not want them to be.

Q 163

Photo of John Woodcock John Woodcock Shadow Minister (Transport)

Presumably, therefore, you would think that this power should be required in the Bill, and not simply enabled by it, with a decision at some later date.

Mark Tanzer: Yes. We are very pleased to see a provision for the power in the Bill. We would urge, assuming it goes through, the implementation of that at the earliest possible opportunity.

Q 164

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

I agree with the sentiment that what is important is that people booking holidays should clearly know whether they are protected, rather than being in the horrible position where you assume you are but you are not sure.

Do you think this issue is wider than package holidays that involve air flights? Does it not extend to all package holidays, whether you are travelling by coach or something else? I assume you are familiar with Skiing-Europe and the various schools that have issues, which frankly took every reasonable measure to think they were protected by the bonding scheme, only for the insurance company to revoke it. Do you think we should be having a wholesale reform to ensure that all package holidays, whatever the transport that takes you abroad, are properly protected?

Mark Tanzer: If it is really a package holiday—put together by an organiser and sold at an inclusive price—it is protected, whether it has a flight or not. ABTA is one of the bodies that will protect packages that do not have a flight. We will protect cruises, coaches and everything else. Under the European package travel directive, those customers must have a means of protection. In the UK, we are one of the means by which that is provided.

In Europe at the moment, they are looking at the scope of the package travel directive to see, in the same way that we are proposing to extend ATOL here, whether that should also be extended to include those types of arrangement that are not formally packages, but look like packages.

In Europe, where a lot of the travel arrangements will not include a flight—because people will be getting a train or hiring a car and so forth—it will become more of a travel directive, which would embrace all these kinds of arrangements. So that you are clear, at the moment packages that do not have a flight are protected. We are one of the bodies that do that. The big growth has been in the unprotected air segment.

Q 165

Photo of Nigel Mills Nigel Mills Conservative, Amber Valley

Where would you draw the line between what is a package and what is not? If I leave here and go and book a flight on Ryanair, for example, it will offer me an allegedly cheap hotel and car hire at some stage in the booking process.

I might think that I have booked a package if I click that hotel or car hire link, but I suspect that I am just being taken to a new separate non-linked booking with a car hire company or a hotel company. Do you think that all that should be a package, if that is what is happening?

Mark Tanzer: In respect of the consumer protection, financial protection and repatriation, yes, we do, because the customer does not understand the difference between what is formally a package and what looks like a flight plus a hotel bought through a site or a linked site.

There are some technical challenges in saying, “On a click-through, is that really a linked arrangement, or is that an advertisement for another site?”, but those are not insuperable. The important thing from the customer need point of view, which is the protections of repatriation and what happens if the company goes bust before your holiday, is that it is exactly the same whether it is a package or whether you have bought one of these arrangements. That is why this is an important step forward.

Q 166

Photo of Julie Hilling Julie Hilling Labour, Bolton West

Why is the scheme currently in deficit? How has that arisen?

Mark Tanzer: I am probably not the one to comment. This scheme has been administered by the Civil Aviation Authority on behalf of the air travel trust fund. There  have been a number of significant failures, which have caused a lot of claims on the fund. The bonding in place has not been sufficient to cover those claims.

Some of that is attributed to this very confusion, where people who had not formally been part of the ATOL scheme had to, none the less, be brought back. It is a conjunction of a series of large failures over a number of years, but it is better to ask the people who have been responsible for setting the security on that than me.

Q 167

Photo of Julie Hilling Julie Hilling Labour, Bolton West

Could I just clarify—I appreciate that you are saying that you are not 100% certain on this—that your belief is that the deficit is because the fund has had to pay out for currently uncovered repatriations?

Mark Tanzer: It is a combination, I think. Sometimes, if you simply have not got the right level of security at the time a company goes bust and they have more passengers than you thought and so on, that will put the fund into deficit. It is probably a combination of things. There have been costs associated with bringing people back who were not covered.

Q 168

Photo of Julie Hilling Julie Hilling Labour, Bolton West

Thank you. I was very surprised to discover when I started to look at all this—I took out my travel insurance and I booked my holiday—that pieces of that would not be covered. Could and should the insurance industry be doing more? Where I am coming from is that people will think that they are insured.

Mark Tanzer: I am sure that it could. It will not happen overnight, because in so far as you are an insurer underwriting someone’s holiday, in a way you are also underwriting the airline that is carrying them. It is a big task for an underwriter to say, “I will underwrite all these airlines together”, because if they go down, that is what will cause an insurance claim.

I do not think that there is a deep insurance market for that at the moment. The policies where you can buy insurance against airline failure are few and far between and as soon as somebody looks a risk, they are taken off. It is not a deep market for insuring airlines against financial failure and that would underlie consumer protection in this.

Currently, you need some statutory support, because then you can educate the financial markets on how they can make money through providing this protection in the medium term, but it will not happen overnight, which is why the extension of the ATOL scheme is a first step. We then need to look at options on how the regulator can have the regulatory part of that, but the implementation of providing the protection can be done by the markets.

Q 169

Photo of Julie Hilling Julie Hilling Labour, Bolton West

My understanding is that if people are covered by ATOL, if flight-plus comes in, they will receive a certificate to say that they will be covered. If people are not covered, however, they will not receive anything. Is there anything that you believe could be done to make people aware? It seems to me that part of that is about competition. If you have paid a bit extra for the cover or if you realised that that holiday did not have any cover, you might make some different decisions as well. I just think that people think that they are covered.

Mark Tanzer: I think it would be hugely helped by a public awareness campaign to tell people that they should be looking out for their certificate when they book a holiday. If they do not get it, they should say, “Where’s my certificate and my protection?” That is different from saying that if people are not providing it, everyone should say, “This holiday is not protected,” which would be laborious. A strong public awareness campaign that makes people want to opt in would be beneficial.

We have been going round the country consulting members about the extension of the ATOL scheme. Far from people saying, “How can I avoid it?”, they are saying, “Can I opt in if it turns out that my arrangements are sold outside the 24-hour period?” Those customers want to be protected, none the less. I would rather build on the positive side and encourage customers to want this, which will drive providers to give it to them.

Q 170

Photo of Julie Hilling Julie Hilling Labour, Bolton West

My final question is about the 24 hours. Do your members think that that small window is adequate or should it be longer?

Mark Tanzer: My understanding is that people can opt in if the time period is longer, so it does work. You have to draw the line somewhere, so people will always have an option to go 10 minutes the other side of the limit and avoid the scheme.

In people’s systems, if someone books a hotel and comes back more than 24 hours later for the flight, the challenge is hooking them up and saying, “That’s not only the same customer but they are part of a linked arrangement.” The systems people have said that the proposed time period is doable. Without too much difficulty, you will be able to join up two elements and say, “That is part of a linked holiday.” We are comfortable with that time frame.

Q 171

Photo of Julie Hilling Julie Hilling Labour, Bolton West

What if it were a week?

Mark Tanzer: You could do that, but the systems challenge would be bigger. It is harder to tie up—particularly online—over a distance of a week rather than 24-hour bookings that are part of the same arrangement. This time frame will capture the vast majority of holiday sales, either on the high street or through the internet.

Q 172

Photo of Pat Glass Pat Glass Labour, North West Durham

When I travelled here on the tube on Monday, I saw an advert for holiday insurance. It was the usual kind—one skiing trip, annual cover—but it referred to volcano dust. I thought, is this the insurance company jumping on a financial bandwagon? The Bill will extend the scheme, but will people still need to take out that kind of insurance?

Mark Tanzer: We do advise people to take out travel insurance. I am not sure what the volcanic ash cover would have given you, but there are other provisions and obligations on airlines to look after people in the event of a volcano. For lost property, medical care and so on, personal travel insurance will always have a place, but as I said, it does not usually cover against financial failure of your travel provider. A strong, clear regulatory scheme such as ATOL, supplemented by your own personal insurance, is the best that we can suggest in the short term.

Q 173

Photo of John Woodcock John Woodcock Shadow Minister (Transport)

The Select Committee advised that passenger welfare plans should be in place to deal with eventualities such as disasters and passengers being stranded. Is that a good idea that has been omitted from the Bill?

Mark Tanzer: It is a good idea. The responsibilities of package organisers extend to care when a customer is overseas if there is a disaster and so on. Those fairly strong protections have been around for a long time.

The challenge comes with the new arrangements, which are often put together by agents who do not have people on the ground, because they do not have the volume and there is not a package organiser. What sort of liability can they reasonably be expected to have and how will they execute it? Someone might walk into your travel agency and say that they would like to go to a hotel that you do not know. You can put together the arrangement, but if it goes wrong, you have no means on the ground to provide care. One of the things that we are arguing for at the European level is that those responsibilities should be clearly defined between the retailer, the organiser, the tour operator and the destination, to ensure that the customer is protected.

Q 174

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Thank you. Are there any further questions? Mr Tanzer, is there anything that you wish to add?

Mark Tanzer: No.

Q 175

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Full Member)

Thank you very much for joining us. We are most grateful.