Select Committee on Transport Second Report


7  CONCLUSION

71. We believe that the Government has taken the wrong decision to reject the CAA's case for the levy to finance the return journeys of passengers stranded by the collapse of their air carrier and to provide refunds.

72. An opportunity to improve consumer protection has been lost. The present arrangement in which ATOL passengers have protection and others do not is plainly unfair. We believe that as the market covered by ATOL shrinks, and the number of unprotected passengers grows, the present arrangements will become increasingly untenable. The Government's decision however means that the present inadequate arrangements will be prolonged.

73. The Government has ignored the CAA, the industry regulator, which has produced a well argued and robust case for a levy on all flights originating from the UK. Worse, there is no evidence of sound, or indeed any serious analysis underpinning the Government's decision. The quality of the written evidence submitted by the Government to this inquiry was strong on assertion but weak on substance, and the Minister proved unpersuasive at our hearing.

74. Meanwhile, the Government is spending time embedding voluntary arrangements for repatriation which do not guarantee the stranded passenger a flight home and which are bound to be structurally fragile. This is an amateurish approach.

75. The Government has asked the CAA to examine whether tour operators' obligations under the Package Travel Directive could be fulfilled by moving away from ATOL bonds to a system that avoided tying up capital and creating barrier to market entry.[130] While this is welcome evidence that the Government recognises the practical difficulties for tour operators of the ATOL arrangements, it will do nothing to ease the problems of protection for the growing numbers of travellers whose arrangements are made independently.

76. The Government has said in response to our predecessors' report that the European Package Travel Directive is in the "early stages" of review by the Commission, and that there may be a legislative proposal in 2006.[131] This hardly amounts to a firm promise of early action by the Commission or enhanced protection for travellers in the mean time. The Government has provided us with no further details about what European legislative proposals might emerge, so we can make no assumptions about whether these are likely to enhance air passenger protection or not. These are not sound grounds for delaying effective action now at a national level. Demonstrably successful UK policies might also contribute positively to wider European policy development. Instead, the Government appears content to wait passively on what has been glacial progress to date on this matter in Europe.[132] Meanwhile, millions of UK air travellers continue to fly unprotected against carrier collapse.

77. Unless the Government takes the steps recommended in our predecessor's report, and the advice provided to it by the CAA, the reality is that the number of UK international leisure air travellers in receipt of adequate financial protection will continue to fall steeply. This is unacceptable. The Government's decision not to implement the CAA's advice amounts to allowing the present policy of protection, on which ATOL is based, to wither on the vine. The day of 'bond based' protection like ATOL is passing; modernisation is required. Given the very large numbers of air travellers and the continuing fragility of air carriers, however, the underlying rationale for protecting passengers against airline insolvency embodied by ATOL remains sound. The Government must take the opportunity afforded by this report to reconsider its decision.


130   Ev 4 Back

131   Transport Select Committee, Financial Protection for Air Travellers: Government and Civil Aviation Authority Responses to the 15th Report of Session 2003-04, Seventh Special Report of Session 2005-06, HC 639, p 1. Three years ago, the European Commission's survey revealed that "Consumer organisations think that this issue should be urgently addressed", Summary of Responses to Airlines' Contracts With Passengers, 6 February 2003, http://europa.eu.int/comm./transport/air/rights/doc_consult_contracts/summary_consultation_paper_en.pdf Back

132   Financial Protection for Air Travellers, paras 49, 50 Back


 
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