Following the recent news that yet another travel company, Flight Options Limited, which owns Kiss Flights (among other companies), has ceased trading, holiday makers are being urged to consider the protection on offer when booking a holiday.
Large numbers of travel companies, around 13 this year alone - including Globespan plc, and, most recently, Goldtrail and Sun4U - have gone bust as a result of the economic climate. The collapse of these companies could have resulted in thousands of UK holiday makers being stuck abroad.
The Civil Aviation Authority (CAA) protects holiday makers from this scenario and also from making a heavy loss on the holidays which they have purchased from their travel company. Enhanced protection is also offered where the travel company is a member of the travel authority ABTA.
However, this protection is only available to those who have booked flights and accommodation with one credit card transaction and are, as a result, protected by the CAA's Air Travel Organisers' Licensing (ATOL) protection scheme. Those consumers who have booked parts of their holiday separately through the travel company could find that they are not ATOL-protected and are awarded little or no compensation as a result of the collapse. Holiday makers will be similarly exposed where the travel agent has separately bought the cheapest flight and accommodation to sell together.
The aviation authority lost its recent case against a travel company (CAA v Travel Republic Company), and was refused an appeal by the Supreme Court. In this case, it was observed that there is no requirement on a travel company to hold an ATOL where they do not organise package holidays. With the number of holidays protected by ATOL falling, there have been recent calls for reform of the law to remedy these shortcomings.
Where a travel company collapses, it is worth bearing in mind that in any insolvency process, holiday makers will rank as ordinary creditors when the company's assets are distributed. In real terms this means that, depending on the assets a company owns, it is often the case that ordinary creditors are lucky to receive any payment at all in respect of debts due to them. Chances of recovery slightly improve in circumstances where a prescribed part of the assets is set aside for ordinary creditors in any insolvency.
With bleak warnings already in place that other travel companies could follow suit, holiday makers are encouraged to check for ATOL protection at the outset.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.