The issue of Holiday Financial Protection through the ATOL scheme has attracted intense scrutiny since the collapse of the XL Group and Freedom Direct.  We have been guiding Mr & Mrs A – consider this quote from Mrs A – “the more this is highlighted the better – various people who I have spoken to – are under the impression that if a Tour Operator has an ABTA/ATOL No, they are covered – how wrong they are!!”  Mr & Mrs A booked a holiday through the collapsed travel provider, Freedom Direct.  They purchased a flight, hotel and transfers, all stated as one inclusive price.  They have advised that it was their intention to purchase a package holiday and that there was nothing that they could see or hear, which put them on notice that it was anything other than a package holiday!

When Freedom Direct collapsed, they followed the route dictated by the ATOL scheme in order to get the holiday restored, or their money back.  After some time they were advised by the ATOL scheme that they were not covered, as they had purchased a ’split contract’, in other words, they had not bought a package holiday, they had created a DIY holiday or a Dynamically Packaged Holiday.

Regular visitors to this site will know that we have been campaigning hard to raise public and political recognition, that the ‘de-packaging’ of the holiday contract, is going to lead to a greater misery or consumer detriment.  The ’supporters’ of ‘de-packaging’ argue that they are operating in a heavily regulated portion of the market, whereas the internet travel providers, low cost or established airlines are selling the same products but operate outside the rules.  If they are successful in their argument, it will lead to the abandonment of Consumer Protections under The Package Travel Regulations and the ATOL scheme!  Essentially, whether you are talking about a small Travel Provider or large Tour Operator, putting packages together at the request of the Consumer, they consider that the correct approach for the market and the legislators to adopt, is to ensure that ‘we are all travel agents now’!  The implication is that if we are all agents, then we attract minimal responsibility and we should return to the wild west of ‘Caveat Emptor’ (Buyer Beware)!

In Mr & Mrs A’s case, ATOL referred them to their credit card company and to ABTA, however, the twist in the tale is that it was agreed that they could go ahead with the flight as it had been paid!  Given that they had paid one price at the time of the booking, was it not reasonable for Mr & Mrs A to expect that their products had all been paid for at the same time – why should any holidaymaker be subjected to the manner in which a travel provider decides to pay for ‘components’?  ABTA are currently trying to secure the remaining part of their holiday through one of the suppliers of the ‘chain’, but have stated to Mr & Mrs A that if they cannot persuade the ABTA member to honour the ‘remaining’ part of the contract, there is nothing further that they can do.

So when does ATOL protection kick in?  Referring to the ATOL website they state, “The Simple rule is “Ticket or ATOL”.  If you pay any money – even a deposit – to a holiday company (our emphasis) in the UK for a flight or an air holiday package, the sale usually has to be ATOL protected.  The holiday company you’re booking with must either hold an ATOL or be an agent of a company that does, in which case it must tell you when you book which ATOL you’re protected by, and as soon as you pay any money, issue an ATOL Receipt to you.  If you’re just buying a scheduled airline ticket from a travel agent (our emphasis) and you get your ticket or airline confirmation straight after you’ve paid, you won’t usually be covered.  ATOL also doesn’t apply if you book direct with an airline (our emphasis)”.

In Mr & Mrs A’s case it looks as if the ATOL scheme is doing a little ’split contracting’ themselves!  The interpretation of their case does not sit comfortably with the current case being brought by the CAA/ATOL against another online Travel Provider, where it is claimed that they were in fact selling ‘packages’.

Mrs A stated, “When I spoke with ATOL yesterday – they confirmed to me that they were fully aware of the way in which Freedom Direct sold their holidays but they could not force them to stop dealing in this way even thought it was against ATOL’s ‘rules/procedures’.  I told ATOL that I felt ATOL they were therefore responsible for the fact that as they knew how Freedom Direct sold their holidays and by allowing them to continue they in fact were condoning the procedure -  knowing they were putting the consumer at risk – and in the circumstances,  as we were not aware as to how Freedom booked our holiday until after we had paid in full -  I wanted reimbursement from ATOL.  They said that until they know the outcome of the current Court cases -  they cannot make any Travel Agent to stop booking holidays in this way – or until the Law changes”.  It appears that there is a lack of consistency in either the application of the rules or interpretation of the rules – no wonder there is confusion amongst Consumers!

As if that were not all, the Travel Industry are also up in arms about the whole issue of Travel protection.  Mr & Mrs A would shout ‘hurrah’ to Chris Photi (Travel Industry Solicitor) when he stated, “However, Freedom appears to have sold identically (he is referring to the comparison of holidays sold by Travel Republic) and had an ATOL, yet the CAA says it is “unable to consider claims in “these” circumstances as there is no evidence of a contract with Freedom for the provision of air travel”.  If arrangements should be licensed, and were sold by Freedom that had a licence, then should not the consumer be paid from the ATOL bond or the ATTF?”

The Credit Card Companies are also furious with this debacle, but it is this article which provides most concern – has the CAA/ATOL scored an own goal?

Mr & Mrs A now have to ‘re-book’ their hotel and transfers in order to save their holiday and live to fight another day – they are not on their own!  In the meantime, Travel Consumers are ‘required’ to pay for this protection – protection that fails to deliver and certainly does not appear to monitor the financial position of the said holiday companies!  Would such a scenario exist within the sale of insurance?  I don’t think so!

It is abundantly clear that the ‘parties’ to this whole sorry mess have become entrenched in their own respective positions, to the detriment of the Consumer!  Are the courts really the best arbiter of such an important issue?  We wait in hope for the anticipated response to the review of the Package Travel Directive and that it will remove the artificial divisions currently operating in this market.  Let no one be under any illusion, if the Travel Industry win the day, Consumers will have much more to worry about than simply losing their money!  For the present, I would call upon the Chairs of the Treasury Select Cimmittee (John McFall MP) & the Transport Select Committee (Louise Ellman MP) to look at this ridiculous situation as a matter of urgency and if need be, with the assistance of the members of their Committee, to create the conditions for an urgent amendment of the current package Travel Regulations or other appropriate legislation!  It is time to save the Consumer from organisational failure!

Tags: ABTA, ATOL, Financial Protection, The Package Travel Regulations

This entry was posted on Friday, May 15th, 2009 at 8:19 am and is filed under Holiday Financial Protection, The Crows Nest. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.