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Travel firms 'will collapse leaving taxpayer with multi-billion pound bill' unless refund rules are relaxed
7 April 2020, 11:45
Travel firms will collapse, leaving taxpayers to foot a multibillion-pound bill, unless UK refund rules are relaxed amid the coronavirus crisis, an industry body has claimed.
Abta is urging the Government to allow companies to offer holidaymakers credit notes as a "short-term alternative" to cash refunds because of the deluge of claims.
Under EU law, firms are required to refund customers within 14 days if their holiday is cancelled.
But many tour operators will go under if they are forced to make pay-outs immediately to impatient travellers, the trade association has warned, partly due to a backlog of payments from hotels and airlines also swamped by the crisis.
It comes after the Foreign Office extended its advice to avoid all non-essential international travel from 30 days to an “indefinite period” last weekend.
Countries such as France, Italy, Belgium, Spain and Germany have amended refund rules after the European Commission admitted its Package Travel Regulations never envisaged cancelled bookings on such a vast scale.
Now Abta wants the UK Government to follow suit to avoid taxpayers being burdened with a £4.5bn bill to make refunds for bust firms, which employ some 500,000 people directly or indirectly.
The Government acts as the financial backer for the UK's main Atol scheme of holiday protection.
Abta is calling for financially-protected credit notes to be exchanged for an alternative booking or a full cash refund at a later date, ensuring consumers' money would be secure.
With their Easter holiday plans in ruins, many passengers have taken to social media to vent their fury at budget airlines and travel firms failing to offer prompt repayment.
Mark Tanzer, Abta chief executive, said: "We know the Government has a lot to manage with the current crisis, but its failure to make these temporary changes to refund rules defies logic and is leaving the consumer in no-man's land.
"It's in nobody's interests for normally healthy, viable businesses to be pushed into bankruptcy. Hundreds of thousands of jobs are at risk and the UK taxpayer will have to foot the bill for customer refunds if there is an industry-wide collapse of travel businesses.
"It's important to reiterate, this is about supporting businesses through an entirely unforeseeable and short-term cash flow crunch - customers will not lose their right to a refund, and their money is not at risk.”
The Department for Business, Energy and Industrial Strategy told LBC News: “The Government has announced a substantial financial package to support business and the public through this turbulent period.
"We will continue to engage with the package travel sector and consumer advocacy bodies to assess the impact of cancellations made in light of the covid-19 outbreak.”