O N T O U R: A scheduled airline failure ” your insurance rights
There is no doubt that confusion reigns regarding the situation in respect of tickets issued and paid for on scheduled airlines who have collapsed and stopped flying. This is a very interesting and topical subject which the specialist travel insurance brokers Marcus Hearn have explained in the September issue of the ”International Travel Insurance Journal” and will clearly be of interest to readers of ABTN.
”Travellers on charter flights and indeed those with scheduled flight tickets purchased in conjunction with a package tour are fully protected by the Air Traveller Organisers Licensing Scheme (ATOL), as the agent or tour operator under their ATOL are liable, in relation to the cost of any section of the journey made under that booking. The agent's liability requires them to refund such monies from their own resources and if financially unable to do so, their bond deposited with the Civil Aviation Authority (CAA), would be called upon to ensure the passengers' full protection.
However, unfortunately in the early 1990's there were a significant number of scheduled airline failures, particularly at the lower cost end of the market which began to cause concern, not only to the industry in general, but also the regulators. In 1993 Marcus Hearn, already well known in the travel industry, launched its scheduled airline failure protection programme which was automatically taken up by a number of large agents selling discounted airline tickets. They did so in order to restore a level of confidence to the general public and such cover was provided on each and every ticket issued by these agents. Noticeably prior to 1995 there was no legal liability for an agent to refund a passenger if they had purchased only a scheduled flight ticket with an airline which subsequently failed. The CAA now moved to close this anomaly in relation to the general public' s protection. Where an agent sold a stand alone discounted ticket under their ATOL they were now required to provide the general public with the choice of one of three options.
(1) Advise the CAA that they would take full financial responsibility on all of those tickets, should the airline fail for financial reasons.
(2) Provide the individual passenger with insurance protection in relation to the cost of that ticket.
(3) To advise the passenger in a clear and concise manner that in the event of the airline failing no protection was available to them, very much like a government health warning on a packet of cigarettes, i.e. purchase this product at your own risk.
Needless to say the third option was the least favoured.
The CAA, obviously concerned with the public's protection, extended the liability of the agent, not only to the repayment of the cost of the airline ticket if the carrier failed before departure, but also the cost in relation to bringing the passenger back home if abroad at the time of such collapse, especially as the cost of a one-way ticket may well exceed that of a "cheap" return fare.
In as much as 80% of the leisure airline tickets issued via agents are provided by the 65 members of the Association of ATOL Companies (AAC) and virtually all of these have accepted either of the CAA's first or second option above, it therefore follows that the majority of the general public' s money is indeed safe. Other tickets issued by agents would fall under the category of "ticket provider" where a ticket is issued immediately or within 24 hours of payment. These tickets do not fall under the CAA's pre-requisite of scheduled airline failure protection, although again the majority of agents still provide this cover in order to safeguard their passengers' interests. The balance of tickets issued by agents would be normal full published fares and invariably the client would have paid by credit card, thereby affording them the protection of the cost of the ticket prior to travel or they would be business house tickets invariably purchased on an account basis and not necessarily even paid for prior to travel.
So is everything rosy as far as the general public is concerned?
Well unfortunately there are still some gaps, but not necessarily enough at this stage for certain members of Parliament to attempt to make a name for themselves at the expense of the travel agents or the industry regulators, as recently quoted in a national Sunday tabloid suggesting a lack of protection exists. The most notable area where the general public will find themselves exposed to financial risk is in the purchasing of an airline ticket directly from the carrier themselves, but even this may not lead to total disaster.
There are a number of travel insurance policies available which provide scheduled airline failure insurance, although these are few and far between and of course the best advice is to ensure that any payment for an airline ticket is made by a credit card as this will avail the passenger of some protection in relation to the cost of the ticket. It should of course be borne in mind that under the Consumer Credit Act credit card companies would not be liable if the cost of the individual ticket was below ”100 or indeed the protection probably would not extend to somebody purchasing airline tickets on their card if it included the purchase of tickets for friends.
It can now be seen that it is not all doom and gloom in the protection of the public.
We are now down to the final group of unprotected passengers, i.e. those purchasing tickets direct from an airline paying by credit card and such cost is below ”100. Admittedly on the face of it there are a number of these tickets available from low cost carriers, but as surveys constantly show the advertised starting price of a ticket is not always available and the eventual price will probably be over ”100.
As a final rule, if the public is purchasing a ticket from an agent and they are being told that they have, or are being charged for scheduled airline failure insurance, they should ensure they receive a copy of the full policy wording and also make payment by credit card.
If at the end of the day you are one of the lucky ones to buy a seat on a low cost carrier direct for ”1 and they go bust ” well I am sorry I am unable to give any advice in this instance and you have lost your money ” but that's life!”