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COMMENT


Lowcost’s collapse begs questions of all parties


Lowcost Travel Group’s failure raises serious questions. The first is why were administrators called in only in mid-July? A second is why wasn’t there


What was said when Lowcost relocated?


“What we’ve done is completely legal. All our customers are fully protected under the European Package Directive. We have the maximum bonding available under Spanish law and comply fully with EC legislation.” Paul Evans, Lowcost Travel Group chief executive, November 2013


“The Balearic scheme provides little protection for UK consumers. The CAA believes that in the event of a failure, customers would get only a very limited payout or nothing.” CAA, January 2014


greater provision for consumer protection? Upon relocating the business to Majorca in 2013, chief executive Paul Evans claimed: “All our customers are fully protected.” Not so, according to the Balearic Islands government, which confirmed Lowcost Holidays Spain had a “total” guarantee of €1.2 million to cover just those with bookings for flights plus accommodation. Were the joint administrators and all other creditors to take nothing there would be less than €8.76 for each of the 27,000 customers and the holders of 110,000 forward bookings. There will be knock-on effects


for companies that contracted beds from Lowcost. Fortunately, the CAA’s insistence on trust arrangements to cover flight-plus Atol business should minimise the impact. But rebooking clients could be challenging. The CAA and Abta, to which


consumers and the industry would normally turn, are largely powerless because Lowcost Travel turned its back on them. The company deserted the


Atol scheme in November 2013. The CAA warned at the time: “The Balearic scheme provides little protection for UK consumers.” A third question is why


2014, Jan 27: CAA reports: “The Balearic scheme provides little protection for UK customers”


2016, July 15: Lowcost Travel Group calls in administrators


was Lowcost not prepared to submit to the scrutiny of the UK regulator? Had it retained an Atol, the CAA would have


110,000


The number of forward bookings hit by Lowcost’s failure


nursed the company through to the autumn to limit the damage to holidaymakers, and the Air Travel Trust would have fully protected bookings. Indeed, we can assume the CAA would have acted before the summer to ensure Lowcost had sufficient capital to continue trading or sufficient collateral to cover its liabilities, or have pulled its licence. Lowcost claimed attempts


to save it had been “hampered by the turbulent financial environment”, while the administrators suggested: “The group experienced significant headwinds in the run-up to the EU referendum…compounded by the subsequent fall in the pound.” This may explain the failure of


a last-ditch rescue, but it won’t wash as an explanation for the group’s demise. This is not a distressed outbound market. Holiday departures from the UK were 8% up year-on-year in the 12 months to April, and industry analyst GfK reports bookings for this summer up 5% year-on-year to the end of June, despite the uncertainty. So what state was Lowcost


Holidays in when it moved to the Balearics? What was its state when it restructured last year and moved to Krakow? What provisions have been made


IAN TAYLOR Executive editor, Travel Weekly 21 July 2016 travelweekly.co.uk 9


since? What money, if any, is left in the business? And, if there was no money to pay for the rooms of so many clients, why was the company trading up until last Thursday? The cash from the customers’


accommodation bookings must run into millions – and it must be somewhere. However, the questions


extend beyond Lowcost to the government and EU, because there is nothing to suggest the group was trading illegally. The EU opened the door to this debacle through its Services Directive, which allows companies based in one state to trade in another under the rules of the state in which they are established. The new Package Travel


Directive, which the government is bound to bring into UK law before Britain leaves the EU, will embed this principle. The problem this poses could not now be clearer.


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