Financial protection for holidays has been a constant discussion topic in the travel industry, most recently with ATOL changes and certificates. A review of the Package Travel Directive (PTD) is also underway. The travel trade has always been vocal about the fact it wants flight-only bookings included under financial protection, but why are airlines reluctant to take it up? In his first column for Travel Daily UK, BAR UK’s Dale Keller explains why.
There have been numerous consultations and much discussion concerning consumer protection, under ATOL and the Package Travel Directive (PTD), on how to best to meet the needs of consumers and the industry.
The industry has shown unity on the need to achieve improved clarity with consumers in understanding what protection they receive with their travel purchase and to reduce administrative burden and layers of duplication that add cost to the industry and consumers.
Where the airline view differs from some sectors of the industry is on whether ‘flight only’ sales should continue to be excluded from ATOL and PTD financial protection schemes.
Airlines continue to state their case that consumers are able to make informed choices and accept some risks, as with purchases in any other sector. Consumers have a good general awareness that a level of protection exists in the market and that they can opt for a package holiday in the knowledge that the protection comes at a price they are willing to pay.
The changes in distribution and consumer purchasing trends have resulted in a significant percentage of flight tickets in the UK being purchased on credit cards, where consumers receive a level of protection. The credit card schemes are funded by airlines through card processing charges that are far higher than for most other merchants.
The cardholder guarantee protects the cardholder if the airline stops operating between the moment they have paid their bill to the card issuer and the day of departure, on flights purchased directly from an airline, through a travel agent or operator and on the internet. The cardholder files a complaint for ‘services not rendered’ to the card issuer who will raise a chargeback to the bank of the airline (acquirer). The acquirer either applies ‘holdbacks’, meaning they postpone paying the card transactions to the airline or they will be in possession of a security deposit from the airline.
IATA also provides an element of protection, in addition to consumer benefits, through the IATA Agency Programme, Billing & Settlement Plan (BSP) and multilateral interlining mechanism.
Apart from providing airlines and agents important economies of scale in issuing tickets and processing payments on any number of member airlines with a single payment transaction, should IATA deem a BSP participating airline insolvent or in breach of regulated standards, it will become suspended from BSP. IATA immediately instructs agents to stop issuing tickets on behalf of the airline and, where necessary, may open a central bank account where the withheld money from all BSPs involved in the suspension are placed.
Once a refund agreement is negotiated by the agency or BSP with the airline (or appointed administrator), agencies can commence refund settlement of unused tickets with their customers.
Airlines are confident that their customers do not wish to pay for duplicate levels of protection on ‘flight only’ arrangements and that consumers should retain the right to purchase supplementary travel insurance schemes or purchase packages where they wish to extend their level of protection.