COMMENT: Air Travel Insurance
It was probably not deliberate, the Civil Aviation Authority does not think like that, but last Thursday, clashing with the high profile Rod Eddington departure lunch at the Aviation Club, it published its advice to government on future air travel protection. The document coincided with a seminar at CAA House in London at which representatives of the aviation and travel industries and consumers discussed the CAA findings.
The CAA recommends that the scope of the current protection system should be extended to protect all air travellers flying from the UK on international flights, with tour operators and airline passengers being covered by a single protection scheme funded short term by a ”1 levy on tickets. Our italics. Whoever heard of a tax being of short-term duration. On the face of it the idea is a first class one and looks cheap. However reading the small print it is not the CAA who seems to have come up with the idea but their consultants, in this case Ernst & Young, who claim to be experts in virtually everything. Consultants can be very good, and Ernst & Young are one of the biggest, but one thing they usually do not know anything about is the nuances of the industry they are dealing with. Civil aviation is a good example. Have they thought out the consequences of say a Brazilian charter airline going bust at the time that one of its aircraft is on the ground at Gatwick? Does the British fund pay for the repatriation of all on board, most of whom would not hold UK passports? With ATOL (Air Travel Organisers Licensing) the tour operator goes through scrutiny. With a free for all anyone could claim to offer a package. ATOL also covers the hotel at the other end. What happens if that goes insolvent? The report talks about the recent problems concerning EuJet, which was an Irish carrier, one of seven from the Republic to go bust over the last five years, out of a European total of 19. The CAA says (and we don”t actually agree with these figures ” the majority of airline passengers have always flown for leisure) that in 1997 98% of holiday passengers were ATOL protected, but in 2004 this had fallen to only 66%. The CAA claims it will drop to a possible 19% as early as 2008. And whilst the report covers international flights, if an airline flying between Northern Ireland and the British mainland were to go bust the consequences would be the same as between London and Paris. You are still flying over water.
The major air carriers differ in their reaction to the recommendation. A British Airways spokesperson was to the point ”There is no justification or need for our passengers to pay this additional cost. With our passenger volume we would have to pay the lions share of the funding to provide protection against other airlines bankruptcy”. No quite true, Ryanair now claims to be a bigger carrier, in Europe at least, but for once Mr O”Leary has kept quiet and not put out a statement.
Branson enterprises are in favour. ”Virgin Atlantic absolutely supports this proposal as it is the fairest and simplest way to ensure passengers are protected in the unlikely event of an airline or tour operator failure. The current system is confusing for passengers and expensive for industry, as tour operators like Virgin Holidays have to set aside huge amounts of capital as a CAA ATOL bond”.
Perhaps the most thorough thought into the whole matter has been taken by easyJet. It says that the ”1 levy would represent a 2.3% increase on an average fare as against 0.5% for British Airways. Clearly not fair. Toby Nichol, director of communications sums it up.
”We agree that consumers should be protected against the financial failure of airlines ” but we disagree violently with the solution proposed by the CAA. Flat-rate charges discriminate against those airlines offering the lowest fares and mean that short haul passengers would be cross-subsidising the cost of repatriating long haul passengers. I don”t see how this is to the benefit of easyJet customers and remain convinced that the CAA”s only real incentive to get scheduled airlines into its scheme is in order for our passengers to fund it. easyJet will continue to make representations to the UK Government and champion consumer interests”.
At the end of the day, travel, in whatever form, is just another product. If you go on a cruise you are forced by the operator to take out insurance cover but it is left to you to decide the level that must be (above a certain minimum). Should not that be the same for aviation or cannot the average passenger be trusted to see that he is adequately covered?
http://www.caa.co.uk/default.aspx?categoryid=436&pagetype=90