TRAVEL INDUSTRY COLLAPSE 2
Supplier failure policies leave agents exposed
Lee Hayhurst
lee.hayhurst@travelweekly.co.uk
Agents who bought supplier failure insurance (SFI) could end up counting the cost of the Lowcost Travel Group failure.
Firms that used Lowcost Beds
to dynamically package holidays and sell them under a Flight- Plus Atol must pay to rebook accommodation themselves and claim on their insurance. Agent members of the eight
Atol-accredited bodies, such as Hays Travel and Barrhead, will have customer money secured in trust accounts, but if they have only basic insurance they will have to fund any difference in the cost of rebooking rooms. Accommodation costs have gone up due to the change in exchange rates, the time of year and, according to some sources, because Lowcost was selling beds for less than they paid for them. Only agents with comprehensive supplier failure cover can recoup the price differential.
Lawrence Assock, head of partnerships at travel insurance specialist Affirma, said some firms were looking to upgrade their cover following Lowcost’s collapse. He said: “Some companies doing
Flight-Plus using Lowcost have been caught out because they only took out SFI. They thought they didn’t need to cover the flight, and it was a cheaper option.” Assock estimated the cost of
Lowcost’s failure for Affirma’s New Zealand-based underwriter CBL will be under £500,000 – the same amount as On Holiday Group’s failure cost the insurer in 2014. He said this time agents had
acted more quickly to rebook beds and so fewer full packages would have to be cancelled, leading to a lower value of claims. John Hays, managing director
of Hays Travel, an Atol-accredited body, said its Independence Group insurer Commodore covers the differential up to the original value of the holiday. “We had a couple of thousand bookings. So far we have 90% rebooked. We’ve got good plans in place. We’ve seen worse.”
Lowcost ‘could damage industry’
Ian Taylor
ian.taylor@travelweekly.co.uk
The head of the advisory committee to the government on air travel insolvency hit out at the failure of Lowcost Travel Group, calling it “a total mess” and warning of damage to “the whole industry”.
John Cox, chairman of the Air
Travel Insolvency Protection Advisory Committee (Atipac), raised the failure in a letter to transport secretary Chris Grayling, saying: “The collapse is a stark reminder of the importance of making sure UK consumers have effective protection whoever they book with.” Cox told Travel Weekly: “When
Lowcost opted out of Atol and moved to Majorca, we asked a lot of questions about the rights of UK citizens. Basically, [we found] if anyone lost money they would have to go through the Spanish courts.” He said the move to Majorca
meant “UK travellers could unknowingly purchase a holiday from a company not in the UK
[Atol] scheme” and said: “This is a total mess.” Cox suggested: “There is a
case for an investigation into the financial fitness of the directors. “They ran the business. They’ve gone bust. They have to take responsibility.” He added: “The health of the
trade depends on consumer confidence, and if that is called into question it damages the whole industry.” Cox also warned of “a knock-on
effect”, saying: “If Atol-holders sourced beds from Lowcost, it could put a financial strain on them and there could be other failures.” The uncertainty facing consumers and trade partners affected by the failure contrasts with the good health of the Atol financial protection scheme, which Lowcost turned its back on. The Atipac annual report, published on Monday, noted there were just 10 Atol failures in the 12 months to March, the largest having just 339 customers abroad and 2,693 forward bookings, and the Air Travel Trust fund had a surplus of £139 million.
28 July 2016
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Lawrence Assock
PICTURE: SHUTTERSTOCK
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