ATOL) Reform: Memoranda Received

This bundle: 1-13 and 15 Air Travel Organisers’ Licensing (ATOL) reform: Memoranda Received NEW items are listed below with the number and title in bold, and are available on the Members’ shared drive (Inquiry/ATOL/Written evidence) No. Author European Low Fares Airline 01 Association 02 Virgin Atlantic 03 Civil Aviation Authority 04 ABTA, the Travel Association 05 Flybe 06 Expedia 07 HolidayTravelWatch Board of Airline Representatives in the UK 08 (BAR UK) Association of Independent 09 Tour Operators 10 TUI Travel PLC Society of Our Lady of 11 Lourdes 12 lowcosttravelgroup 13 lastminute.com 15 Department for Transport ATOL 01 Written evidence from the European Low fares Airline Association (ELFAA) (ATOL 01) ELFAA credentials as stakeholder The European Low Fares Airline Association (ELFAA) represents the principal low fares airlines in Europe. ELFAA member airlines carried over 183 million passengers over the past 12 months July 2010 – June 2011. The low fares share of intra‐Europe scheduled point to point traffic is currently 43% and is forecast to grow to 60% by 20201. Financial protection against airline failure A report by consultants Steer Davies Gleave on behalf of the European Commission2 found that, of the over 750 million air passengers p.a. in Europe, only 0.07% were affected by airline failure in the ten years 2000‐2010. Of these, only 12% (0.00084% of total) were away from home at the time of the failure. ELFAA therefore considers that any inclusion of airline “seat only” sales in the ATOL scheme, would be massively disproportionate. Besides distorting competition with other modes, it would distort competition between airlines in that customers of financially strong airlines would cross‐subsidise those of the minority of customers, who favour weaker competitors. Perversely, it could even exacerbate the number of consumers affected, in that cash‐strapped airlines would likely seek to trade their way out of difficulty by price‐cutting, setting aside the concerns of hesitant customers by pointing to the fact that they were fully protected in the event of the airline’s failure. Preferred measures to protect air passengers against airline failure include: More effective regulatory oversight ELFAA believes that there the most effective way to protect passengers is by closer monitoring by the regulatory authorities of the financial strength of airlines, emitting signs of financial weakness – protection before rather than mitigation after the event. Before the collapse of Excel airways in the UK, the airline had not paid APD over to the Government for several months and had also not been settling airport charges. Rescue fares ELFAA airlines have, for some time, been voluntarily offering rescue fares to passengers, stranded as the result of the failure of another airline. As a minimum, these offer repatriation back to base for a nominal fare, for 2 weeks following the collapse of the original airline, subject to documentary evidence of a reservation with the airline concerned. In individual cases, ELFAA airlines have exceeded these minima. ELFAA would support the mandating of rescue fares to all airlines. Credit card protection Low fares airlines sell predominantly via the web. The most‐preferred means of payment – credit card – offers certain protection. Sale of insurance including SAFI cover on a voluntary basis. In addition, airlines offer to sell customers their own insurance cover, most of which policies include Scheduled Airline Failure Insurance – SAFI, as part of the insured risks. The Third Package requires 1 York Aviation Report on Market Share of Low Fares Airlines in Europe, February 2011. 2 Steer Davies Gleave Impact Assessment of passenger protection in the event of airline insolvency, February 2011. ATOL 01 airlines to offer this only as a conscious opt‐in choice by the customer, many of which elect not to avail of it. It would be perverse to, on the one hand, insist that customers be able to exercise conscious choice over the purchase of such cover, while, on the other, considering imposing an across‐the‐board compulsory levy on passengers, when the percentage, which might be exposed to the risk of airline failure, is decimal dust. ELFAA would be supportive of a mandate requiring airlines to offer the sale of insurance, including SAFI cover, to passengers on a voluntary basis. This would have the merit of providing a record of those passengers who had declined it. Sales by airlines of “flight plus” ELFAA is concerned at the proposal to include sales by airline of so‐called “flight plus”, as distinct from integrated package holidays. Given the range of insurance options, available to customers, ELFAA sees no case for their inclusion in ATOL. January 2012 ATOL 02 Written evidence from Virgin Atlantic Airways (ATOL 02) 1 Virgin Atlantic is grateful for the opportunity to provide evidence to the Transport Committee in its assessment of the proposed reforms of the ATOL scheme. 2 Virgin Atlantic has previously responded to the DfT’s consultation on ATOL reform. Our key points, which remain the same, were: • UK airlines operate in international global market and compete with international carriers and should not be competitively disadvantaged. • Consumers should continue to be allowed choice and freedom without additional cost. • Regulation should be fair and proportionate to the problem. • Consumers should be clear about when they are covered. The many tiers proposed do not serve this purpose. 3 ‘Flight Plus’ 3.1 Virgin Atlantic was pleased to be able to assist the DfT in its preparations for the Bill, by responding to supplementary queries regarding Virgin Atlantic ancillary sales. 3.2 Virgin Atlantic has a number of ways in which customers can buy flight tickets; directly via our Contact Centres, through our website and we also sell tickets through travel agents including Virgin Holidays. These agents are covered by IATA, ABTA and ATOL regulations. 3.3 Our Contact Centre can offer the option to ‘add on’ car hire to a flight and this is invoiced separately to the customer. Our website offers accommodation and car hire through Virgin Holidays. This is invoiced separately from the flight booking. 4 We remain concerned that, rather than providing clarity, these reforms actually make it difficult to understand the potential impact on our customers and our business. We have a number of questions which should be answered before this Bill is enacted, regarding the logistical implementation and scope of the proposals. 4.1 Notwithstanding the significant technical challenges associated with recording when a ‘flight plus’ booking was created, we assume that we would need a process whereby we advised the passenger what that actually meant for them. For those passengers to whom we had offered car hire at the time of the call, would we need to advise them if they add the car hire on but outside the ‘day’ timescale that they would then not be covered by ATOL? Could passengers perceive this as sales pressure rather than advice? 4.2 Could the £2.50 APC (ATOL Protection Contribution) drive booking behaviour by encouraging consumers to book ancillary products outside of the ‘day’ timescale window, thus avoiding the aims of the reform proposal? 5 The DfT consultation document (4.6) states that the Government will introduce ‘flight plus’ into the scheme through secondary legislation but that airlines sales would require primary legislation. What would the potential timescales be on this? ATOL 02 5.1 As enabling powers have been added to the Civil Aviation Bill, how far in remit and enforcement authority would this go? 5.2 If all airlines’ ‘flight plus’ are to be included in the scheme, how will this extend to non UK airlines? It is perhaps less common for a UK consumer to make a package holiday booking through a non UK travel agent but they are highly likely to book over the internet a flight with a non UK airline which also offers hotels and car hire. To omit these carriers would not only place UK carriers and tour operators at a distinct competitive disadvantage but would also be very confusing and unfair for the consumer, undermining the aim of the reform. 6 ‘Right to Fly’ 6.1 Virgin Atlantic has worked with the CAA on the proposed reforms of ‘right to fly/specified operator’ to help understand the detail in order to identify practicable solutions. Despite working through the various distribution channels with the CAA and other stakeholders, this element of reform has prompted many further questions and potential issues. These would need to be fully explored with all stakeholders before any decisions are taken. 6.2 It would be useful to understand the rationale and impact assessments that have justified this element of reform. As a regulated airline Virgin Atlantic issues tickets directly to consumers and allows IATA agents to issue tickets. We are not familiar with any occasions when passengers are denied travel once they hold a booking and ticket to fly. The scenario where a customer has paid in full to an ‘agent’ but does not have a booking or ticket inside agreed and regulated timescales would appear to enter a grey ‘fraudulent’ marketplace. Airlines are not the appropriate authority to police this. 6.3 We advised the CAA that we also found the language of ‘right to fly’ potentially misleading, as carriers must protect the ‘right’ to deny a passenger carriage for reasons of Visa or Passport issues or security reasons, for example a passenger who may be intoxicated or abusive. 7 We welcome the DfT recognised the need to take time to gather all available data on the decision making process. We hope that this measured approach will take into account all of the details in order to achieve the objective of making matters clearer for the consumer.

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