Business Travel Show Europe Kick Off, 23 February,
Global Travel Risk Summit Europe, April 2023,
3rd Annual Sustainable Business Travel Summit
Bonds put TMCs under pressure, the right to a refund, and Google joins the travel fray
WE LIVE IN DIFFICULT FINANCIAL TIMES, and despite the fall in volumes of business travel, regulators are looking for increased financial security from travel management companies (TMCs). In mid-July 2010, the latest statistics were revealed by the Office for National Statistics, indicating that UK business travel fell by 23 per cent in 2009, while 19 per cent fewer business trips were made by non-residents to the UK. Falling business traveller numbers place additional pressure on TMCs, and it is in this market that regulators must consider whether financial security should be given.
In addition to the International Air Transport Association (IATA) being able to demand a cash bond from any TMC which appears to be in financial difficulty, it is tightening the rules on bonds where an agent does not appear to have a sustainable business model. A travel agency in its first three years of trading has to provide a bond worth 16 per cent of its projected turnover, which is lifted after three years subject to the TMC being profitable.
As if this financial belt tightening was not enough, it is now a requirement of the Association of Train Operating Companies (ATOC) for agents to provide ATOC with a bond guarantee. ATOC bonding needs to be equal to the amounts of the two highest consecutive periods of rail sales under the TMC's ATOC licence, and is reviewed on the basis of the last 13 accounting periods. ATOC has the power to ask for an increase in the bond where there is an increase in the agent's rail bookings. For new applications, the bond has to be equal to the two highest sales periods.
Also bubbling along in the background is the current consultation on revisions to the Air Travel Organiser's Licensing scheme under the regulation of the Civil Aviation Authority. This is likely to be applied to sales of any 'flight, plus...' packages and therefore is likely to affect most TMCs and their business travel bookings.
For some TMCs it is particularly difficult finding bonds in the current financial climate. The number of insurers in the market has fallen, and the risk has increased for bond obligors, resulting in a hardening of rates. All this creates extra commercial pressure for TMCs while trading in a difficult marketplace.
For denied boarding, cancelled flights and long delays, air passengers rights are already covered by EU Regulation 261/2004, which requires airlines to pay minimum levels of compensation. A recent European Court of Justice decision determined that a flight can now be considered cancelled after a delay of only three hours, and this is now the subject of an application for judicial review by British Airways and Tui. 261/2004 was also the regulation responsible for putting the onus on the airlines for the costs of stranded passengers during the volcanic ash episode.
The EU has now announced similar rules for delays and cancellations for sea travel, to come into force within two years. The proposed regulations include new rights for passengers for a refund or re-routing if a journey is cancelled or delayed by more than 90 minutes; free meals and accommodation of up to three nights, capped at €80 a night, for travellers stranded by a cancellation or delay; compensation of between 25 per cent and 50 per cent of the ticket price if a journey is delayed or cancelled; and free assistance for people who are disabled. Similar rules are being put forward for rail travel, too.
A recent survey has established that some airlines are making it difficult to reclaim air passenger duty (APD) when a flight ticket is cancelled. Many airlines charge an administration fee as a condition of reclaiming the tax, often making it uneconomic for passengers to pursue it. A recent survey by consumer title Which? found that charges to reclaim tax ranged from £17 to £30 per person, with only Easyjet among the major airlines willing to refund APD without charge. Of course, airlines argue that the administration fee accurately reflects their own office and administration costs in carrying out the refund. This issue is particularly important in respect of the significant increase in APD due to come into force from November 2010.
In early July 2010, it was announced that Google would become a major player in the travel sector following its entry into the market by its purchase of ITA Software for some £460 million. This, coupled with advances in mobile phone technology, is likely to see big changes to mobile commerce and the way that travel bookings take place. Google will now be able to use ITA's data to advise users of where to find the best flights. Initially this will be driving business to travel websites, but eventually it is likely to see Google selling seats directly to passengers. The development of mobile technology was also emphasised with BA's launching of an app for iPhone users, which can display a mobile boarding pass. With these rapidly increasing technological advances, TMCs need to ensure that they can offer such up-to-date services to their corporate clients.
What is not clear, however, is how traditional contract terms, details of fare restrictions and other legal information is communicated during this process. Technical small print can often be tucked away somewhere on a website, the significant terms of the agreement sometimes so well 'hidden' that the passenger could reasonably argue they aren't valid, so reading the lawyers' even smaller print on a mobile phone is likely to present a bigger challenge still...