Complaints and enquiries - Air Transport Users Council

16
Financial protection
Last year the failures of Oasis Hong Kong Airlines, Zoom and XL, amongst
other airlines, left thousands of British passengers stranded abroad or, for
those who were yet to travel, out of pocket. This is because there is no
financial protection against the failure of schedule airlines in the UK as there
is for tour operators (under the ATOL scheme).
When an airline fails, passengers can get their airfare refunded from their
credit card company under the Consumer Credit Act if they made their
booking by credit card. But purchases made on credit cards must be above
£100 and be made directly with the supplier. And many passengers do not
pay for flight tickets with a credit card; they may not own one or they may wish
to avoid credit card charges. Alternatively passengers can get their money
back through their travel insurance. But few travel insurance policies offer
cover against the failure of scheduled airlines and, of those that do, some
have exclusions that appear to potentially dilute the cover.
For a number of years, we have called for government to introduce a financial
protection scheme for the failure of scheduled airlines similar to the ATOL
scheme for tour operators. In 2005, we supported the CAA’s detailed proposal
for a financial protection scheme for scheduled airlines. But the Government
declined to take forward the CAA’s proposals.
In October, our chairman wrote to Geoff Hoon, the then Secretary of State for
Transport, about this issue. In her letter she suggested that the current
economic climate and the increasingly competitive nature of the industry
raised the spectre of a greater likelihood of airline failure. This, together with a
background of consumers’ general lack of understanding of financial
protection, had made air passengers increasingly vulnerable to the impact of
an airline’s failure. Further, we suggested that this was clearly demonstrated
by the numbers of passengers seemingly left out of pocket or stranded abroad
following recent failures.
The AUC’s previous position in respect of scheduled airline failure has been
that protection should be via a flat fee levy on all passengers to be paid into a
common fund. This levy should cover passengers for reimbursement of
monies and for those already abroad, completion of holiday and return home.
We continue to hold this view and urge that detailed consideration be given to
extending financial protection for air passengers, to include the failure of
scheduled airlines.
Despite the current economic climate and pressure from us and other industry
stakeholders, the Government shows no sign of introducing a scheme.
Perhaps our best hope may be to look to Europe. Last year, the European
Commission commissioned a study to consider the impact on EU consumers
of airline bankruptcies based on an analysis of the causes and situations
surrounding aviation bankruptcies in the EU since 2000.