Appendix 1
I am responding to the Transport Committee report:
Financial Protection for Air Travellers: Second Report 'Abandoning
Effective Protection', which was published on 4 February 2006.
The title suggests that the Government is reversing
existing legislation, which is not the case. The report criticises
the Government because we did not agree to the Civil Aviation
Authority's proposal for a £1 levy on all international flights
leaving the UK, to extend financial protection beyond package
to flight-only passengers. The report calls for the Government's
decision to be revoked.
The Government does not agree with these conclusions.
We considered the Civil Aviation Authority proposal carefully,
but we were not convinced that it would be fair, fully effective
or proportionate. Our reasons were set out in our Memorandum to
the Committee and have also been explained during debates on the
Civil Aviation Bill. In summary they are:
i. not fair because the bulk of the £250
million fund which the CAA intended to build up would have been
spent on refunds, not repatriation, and would have benefited in
particular those taking expensive trips (with financially insecure
companies). Also, the state does not generally organise refunds
for products where the supplier goes bankrupt before delivery.
ii. not fully effective because independent travellers
would only be covered for their flights, but not for their hotel,
campsite or car hire company.
iii. and not proportionate, because UK airlines
have committed to helping stranded passengers return home at moderate
cost. The European Low Fares Airline Association has reviewed
experience with EU-jet last summer and agreed to improve its arrangements,
for example better communication, keeping offers open for at least
2 weeks and making seats bookable. In these days when there are
so many options for travel, people are far less likely to be stranded
overseas with no alternatives for getting home. As regards refunds,
travellers have other ways of protecting themselves. They can
buy insurance which covers Scheduled Airline Failure. They can
pay by credit card (which may involve a surcharge), giving protection
under the Consumer Credit Act for transactions over £100.
We do not believe those who have protected themselves have to
do so twice over.
Consumer information
We shall continue to encourage airlines to include
information to passengers booking online that flight-only bookings
are not ATOL-protected. Both BA and Flybe have posted such a message
and amended the travel insurance they sell to include this cover
(BA in respect of all the oneworld alliance partners). Some other
airlines are working on this, and those already committed account
for 30-40% of the CAA's target group. In addition the Government
understands that more general travel insurance providers are working
on including Scheduled Airline Failure.
Increasingly media travel pages are drawing the need
for personal financial protection to passengers' attention. In
addition there is information for passengers on the CAA, FCO and
Air Transport Users Council websites. The FCO website has been
updated and now includes the following advice:
Credit Card Protection
If you buy your ticket or tickets with a credit card, and your transaction come to more than £100, your money is protected under the terms of the Consumer Credit Act. This protection does not apply to debit cars such as Switch and Delta - a point to bear in mind when planning to avoid the credit fee charged by some airlines.
Your money may be protected even if the cost of your air travel was less than £100 and you paid by credit card. Provided you claim within a reasonable time, many credit card issuing companies will refund money to consumers if the airline with which you booked becomes insolvent, including the cost of unused return tickets.
Further information on credit card protection can be found at the following website:
http://www.consumerdirect.gov.uk - Buying on credit
Further information specifically on financial protection for air travellers can be found at the website of the Air Transport Users' Council:
http://www.auc.org.uk
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CAA review of bonding
We have asked the CAA to review the existing ATOL
bonding arrangements. They have consulted industry informally
and will shortly, go out to formal consultation on their proposals.
That may result in tour operators paying a single levy per customer
instead of financing both a bond and a contribution to the Air
Travel Trust Fund. Rather than extending compulsory cover beyond
those caught by the Package Travel Directive (PTD), we are looking
to make the existing ATOL system less onerous. The Directive is
however under review by the European Commission.
To summarise: in view of the CAA review of ATOL bonding,
the European Commission review of the PTD and the improved availability
of consumer information and Scheduled Airline Failure Insurance,
the Government does not intend to alter its decision against a
mandatory financial protection levy on international flights.
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