‘Lowcost’ but high risk
Details
Last week’s announcement of Lowcostholidays’ administration has brought a stark reminder to consumers and the wider industry that travel service providers based outside of the UK do not feature the financial protection offered to UK based consumers under the CAA’s ATOL scheme. Consumers who booked via the Lowcostholidays Group are now faced with the dilemma of holidays being curtailed in resorts, having to pay for accommodation and/or flights home again and cancelled summer holidays at the last minute. From an industry perspective, any OTA’s or tour operators using Lowcostholidays’ group inventory are having to deal with the fact that they may have to find alternatives for customers (in accordance with Flight Plus scheme rules), the inevitable credit card chargebacks that arise in these situations and the administrative nightmare of dealing with it all just as the summer holiday season begins. In some cases supplier failure insurance may be an option but this may also depend on whether consumers purchased adequate cover and indeed whether insurers will cover the failure of Lowcostholidays at all; in the past businesses that are deemed to have been at risk of failure have been excluded from such policies.
We know too well the controversy which surrounded Lowcostholidays’ move to Spain back in 2013. The reason was simple - it complied with the Spanish insolvency protection regime and so relied on the exception provided under Regulation 16(2) of the UK’s Package Travel Regulations 1992. We now know that the reality is somewhat different – customers potentially face a maximum compensation payment of £7.50 in view of the limited bond levied by the Spanish authorities. Whilst these recent developments support the CAA’s initial concerns back in 2013 when it raised awareness of the risk to UK consumers, the EU has since made it clear that the move was legitimate. In the future, the new Package Travel Directive calls for member states to recognise insolvency protection regimes adopted by other member states and will prevent additional burdens from being placed on overseas travel companies.
While post Brexit the anticipated consultations regarding the implementation of the new Package Travel Directive and reform of the ATOL scheme have not been a priority for the UK Government, it is evident that this recent failure will no doubt see the powers that be at the CAA beating the drum about the ‘gold plated’ consumer protection offered by the ATOL scheme which has for some time been viewed as obsolete.
In the intervening period, we fully expect the CAA to be contacting ATOL holders to establish the impact of Lowcostsholidays’ failure on their business.
If you are concerned that your business will be adversely affected by the failure of Lowcostsholidays, please feel free to contact a member of our team who are on hand to offer assistance.
