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


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 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.

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69