BUSINESS TRAVEL HAS consistently been excluded from the consumer protection legislation which relates to the leisure sector. In particular, there is no requirement for airlines to enter into protection arrangements against their potential insolvency. Generally, when an airline fails, passengers have little recourse to recover their money other than relying upon Section 75 of the Consumer Credit Act 1974 (where they can ask that their credit card transaction be the subject of a chargeback), or by the purchase of scheduled airline failure insurance.
Business travel arrangements have been excluded from the raft of regulations that relate to the sale of package holidays, as business travellers are not “consumers” requiring protection. Unlike business travel arrangements, the current regulations relate to the sales of “packages” that are governed by the Package Travel, Package Holidays and Package Tour Regulations 1992 and the Civil Aviation (Air Travel Organisers’ Licensing [ATOL]) Regulations 1995. The present ATOL regulations protect pre-payments made for packages, and where the travel organiser fails when people are on holiday overseas, the licensing scheme covers repatriation flights.
Breathing space
However, there have been difficulties in the legal definition of a "package", which has meant the emergence of online component providers who have argued they are not covered by the ATOL scheme. This has meant that the Department for Transport (DfT) has announced that it intends to implement new rules with the introduction of the Civil Aviation (Air Travel Organisers' Licensing) Regulations 2011. The DfT was due to bring the reforms into force on January 1, but Minister for Transport Theresa Villiers recently postponed them until April, to give "businesses more time to make the necessary preparations".
While for traditional package organisers little will change, there are two new concepts, Flight Plus and Flight Only, which are causing concern among the business travel community.
The consultation process for the new 2011 ATOL regulations has largely excluded involvement by airlines and travel management companies (TMCs), because the business travel community has not recognised that the new regulations may impact upon them. Given the short time between now and the introduction of the new regulations, it is just now becoming clear how airlines and TMCs need to understand what their impact will be.
There are no general exclusions for business travel bookings in the new regulations. The government has proposed that credit sales be excluded from the new regime, which it believes might have the impact of exempting business travel, but it is not thought likely that simply excluding credit sales from the scope of the new regulations will let business travel out of the new regime. Under the credit sales exemption, sales of Flight Only and Flight Plus arrangements (where flights are sold in combination with accommodation or car hire) will only be exempt, for example, where travel takes place within a week. But where business travel takes place, say, five weeks after booking, then an ATOL will currently be required Far more simple would be to include the definition of a "consumer" in the new regulations to exclude activity for business travel.
The new regulations propose to include flight-only transactions under ATOL, although the passenger is not entitled to a refund of the ticket costs but is entitled to repatriation if there is a failure. The regulation also includes the concept of the "right to fly provider" who will be exempt from the regulation only if the airline on which the ticket is sold is a "specified operator". This means the airline has to specifically confirm to the UK Civil Aviation Authority (CAA) that it will recognise and accept liability for all the ticket sales for its agent and their own sub-agents.
It is not known whether airlines will agree to take up this risk by recognising networks of agents and sub-agents and indemnifying agency ticket sales in this way. Many TMCs have expressed disappointment that the new regulations remove the concept of a "ticket provider" being exempt, and that the wider definitions again include agents in the business travel sector.
CONSUMER PROTECTION
There has been considerable debate in the leisure sector concerning the extension of consumer protection to airlines that currently do not have to offer any financial security to the passenger booking a ticket. One area of concern has been airline click-throughs where, after booking a ticket, the passenger can then click through the website to purchase accommodation and car hire. One leading travel lawyer takes the view that Flight Plus (requiring an ATOL) does include airlines, as airlines are not specifically excluded from the definition of a "Flight Plus arranger".
The travel industry needs to understand which activities are included or excluded in the legislation, and whether certain parts of the market will react to the increased risk by curtailing some of their business activities. For example, it is not known whether airlines would agree to adopt the risk of becoming a "specified operator" and recognising every ticketing activity of all of their agents.
This would be a wide commitment, which could result in airlines reducing their agency distribution.
The impact of the latest regulations is bound to require those caught by the scope of these new definitions to review their contracts, agency agreements and other trading activity to ensure protection in the event of these new rules being introduced in their current form.