06 May

ABTA Chief Executive gives evidence to House of Commons Transport Committee on impact of coronavirus on travel industry

ABTA’s Chief Executive, Mark Tanzer, today gave evidence to the House of Commons Transport Committee as it looks at the implications for transport of the coronavirus pandemic.

Asked how the Government can support travel agents and tour operators, Mark Tanzer, highlighted a number of areas, including:

  • providing guidance and clarity on refunds for package holidays, including confirming publicly what the CAA has stated privately, that Refund Credit Notes covering ATOL package holidays with flights are financially protected. This would be a significant step in supporting consumer confidence.
  • reviewing future furloughing rules, enabling travel businesses to have a degree of flexibility and allowing either a part-time return to work or some tasks to be undertaken without the loss of all salary support.
  • doing all it can, working with the ABI and insurers, to ensure adequate travel insurance cover is available to customers when FCO travel restrictions start to be lifted. 

Mr Tanzer commented:

“ABTA welcomes the Committee’s work to understand the situation facing different types of travel business and their customers. Travel agents and tour operators are facing different challenges to airlines, and we urgently need Government intervention and guidance in a number of areas, including refunds, furloughing and travel insurance.”

On the refunds situation Mr Tanzer said:

“The coronavirus crisis has meant that hundreds of thousands of package holidays have been simultaneously cancelled. While many customers are rebooking their holidays for a future date, some would prefer a refund, which is their right under package travel regulations.

“However, the regulations were never designed for a crisis of this nature and scale and many businesses are unable to deliver immediate refunds. Tour operators have not received money back from suppliers such as airlines and hotels and are unable to meet a 14 day window for refunding a package holiday, and have therefore been asking customers for more time. 

“ABTA has been urging the UK Government to provide guidance on refunds since the coronavirus crisis started, but the Government has yet to act or provide any public comment. Meanwhile, the situation continues to deteriorate for travel agents and for tour operators, as well as their customers, many of whom are understandably frustrated and anxious about the current situation and the status of their refunds.

“In a bid to bring some order to an exceptionally difficult situation while ensuring that customers keep their right to a refund and financial protection following cancellation of a package holiday, ABTA has developed guidance for Members who may need more time to process refunds. This aligns with the Competition and Markets Authority’s position on preserving the customer right to a due refund, while recognising the fact that refunds may not be able to be paid within the statutory period.

“It’s in everyone’s interests for the Government to come out publicly and offer support and guidance on this issue.  While the payment rules of the ATOL fund are clear, and consistent with the protection of deferred refunds, a lack of public comment has understandably led to some customers feeling anxious or confusing them with holiday vouchers, which do not offer the same protection.

“If the Government is unable or unwilling to act or provide guidance on the 14 day window for refunds, then it will need to explore other options or face the inevitable failure of these businesses.  An industry-wide collapse of travel agents and tour operators would be the worst possible outcome for these businesses and their staff, for their customers who would have to wait many months for refunds and for the UK taxpayer who would end up footing the bill for the ATOL scheme.”

Refund Credit Notes 

The guidance ABTA has created for its Members – who are travel agents and tour operators, not airlines - on Refund Credit Notes is designed to bring order to an exceptionally difficult situation and to ensure that customers’ rights to a cash refund, and protection should the firm go bankrupt, remain.

Where tour operators are not able to immediately refund customers, they might offer customers financially protected Refund Credit Notes for cancelled packages, to be redeemed either for a cash refund or another holiday at a future date. 

Refund Credit Notes document a customer’s right to a refund or rebooking for a package holiday and confirm financial protection. The financial protection is provided either by ATOL (for flight packages) or an Approved Body such as ABTA (for non-flight packages). The payment rules of the ATOL scheme clearly state that refunds are due to customers with unfulfilled ATOL bookings where their ATOL-holding company fails.  This is not the case with holiday vouchers, which are not financially protected, or with vouchers from airlines for cancelled flights.

ABTA fully supports the Competition and Markets Authority’s position that the timeframes for providing refunds should be made clear to consumers, that refunds should still be given within a reasonable time and that consumers should not be misled or pressurised into accepting credits or re-scheduling and that the terms of any credit should be fair and transparent.

ABTA is carrying out investigations under its Code of Conduct where customers are refused or misled about their right to a refund for a cancelled package. Sanctions include fines and termination of membership under the ABTA Code. 

A guide to Refund Credit Notes (RCNs):

  • An RCN entitles customers to rebook a holiday at a future date or receive a cash refund by the time of the expiry date of the note. 
  • An RCN retains the financial protection that came with the original booking – for a flight-package this is ATOL, for a non-flight package this is likely to be ABTA. 
  • The expiry date on an RCN will not be later than the underlying protection, so that you can be confident that the RCN is protected in the event that the company fails.
  • Holiday vouchers are NOT the same as RCNs and do not come with financial protection of ATOL or ABTA.
  • RCNs only cover package holiday bookings. If an airline offers you a voucher for a cancelled flight, check the terms and conditions with the airline, it’s not the same as an RCN.
  • If you do not wish to accept an RCN you should contact your travel company. 

To help explain RCNs to customers ABTA has an updated FAQ on its website and has created assets to accompany this in the form of an infographic and video explainer, which can be found at abta.com/coronavirus.

More information on refunds and Refund Credit Notes:

Where Members are unable to immediately refund customers, the Refund Credit Note guidance introduced by ABTA is intended to advise Members on how they should document the refund due to the customer as a Refund Credit Note, reflecting the value of consumer prepayments for the booking protected by the ATOL scheme or ABTA scheme of financial protection. 

This is so the consumer will always have the required evidence of the refund outstanding in the event of a tour operators’s failure, in order to meet the claims evidence requirements of the CAA ATOL scheme and ABTA scheme. 

See, for example, the CAA ATOL scheme Air Travel Trust Payment Policy - https://publicapps.caa.co.uk/modalapplication.aspx?catid=1&pagetype=65&appid=11&mode=detail&id=7741 – section 4.2. 

The ABTA scheme affords the same protection to refunds due.

ABTA guidance expressly states: “The consumer has the right to redeem the Refund Credit Note against a future booking with the travel organiser or to receive a cash refund.”

If customers have contacted their travel company and feel that they are being treated unfairly in respect of cancellation terms in the wake of Covid-19, their legal and statutory rights remain and they can report the matter to the Competition & Markets Authority using the online form. https://www.coronavirus-business-complaint.service.gov.uk/