Coronavirus: Government decision on refunds expected next week
A UK government decision on whether to suspend the consumer refund rules of the Package Travel Regulations is not expected until next week.
The decision by the Department for Business (BEIS) remains in the balance following a meeting of Abta, the CAA and officials of BEIS and the Department for Transport (DfT) on Thursday.
Travel Weekly understands this is likely to have marked the final discussion on the issue.
ABTA has warned the government of “mass failures” and “an industry-wide collapse” if the PTR requirement to refund consumers for cancelled bookings within 14 days is adhered to.
A decision is urgent, not least because Tuesday, March 31 will mark 14 days since the UK Foreign Office advised against all overseas travel – triggering immediate cancellation of more than two million protected bookings.
The total value of refunds owed has not been made public, but Travel Weekly has been told “it’s a colossal number” which threatens wholesale insolvencies.
The government is aware this would deprive most consumers of early refunds and leave the DfT to pick up the bill as the CAA and Air Travel Trust (ATT) which underwrites Atol consumer financial protection is still dealing with the failure of Thomas Cook last September.
The Cook collapse cost the ATT £481 million and the government an additional £156 million, the UK’s National Audit Office revealed last week, with the final bill still to be assessed.
Abta wants a suspension of the legal requirement to refund consumers in full within 14 days of cancellation, requiring a temporary change to the PTRs.
The association and the CAA have been urging the DfT and BEIS to act for a fortnight.
Abta has partially taken the matter into its own hands, advising members to delay refunds and issue ‘refund credit notes’ on ATOL-protected bookings, initially up to July 31.
It wants BEIS, which oversees the PTRs, to make this legal and the DfT – which oversees the ATOL scheme – to confirm protection for the delayed refunds should travel businesses go bust.
Travel Weekly understands government ministers and officials are concerned delaying refunds “is not good news for consumers”.
An industry source said: “They get this [proposed refund credit note] regime will deliver refunds more quickly to people but are worried about how to explain it to consumers.”
Concern that the EU may react to a breach of European rules is also troubling officials despite Britain leaving the EU. All EU regulation remains in force until at least the end of the year.
The source suggested: “The very fact Abta is still in detailed discussions with the government on this is positive.
“Officials understand this is not the industry bleating or crying wolf, but it is a difficult decision for them. Abta is trying to pull off a balancing act.”
The source suggested: “The DfT knows Abta is not over-egging it. They saw how much flak the government took over Thomas Cook.”
The problem is also set to grow worse. The initial Foreign Office advice against all non-essential travel was for 30 days. More bookings will be cancelled as the advice period is extended, adding to the sums to be refunded.
The source said: “The pressure is going to build as time goes on. It’s a rolling problem.”
Abta has said it will stand behind the refund credit notes as a guarantor up to July 31. But for the delayed refunds to work, the DfT [through the CAA] needs to stand behind refund credit notes issued for Atol bookings.
The source noted: “It will only work if Abta and the CAA underwrite it. The CAA is in an invidious position, but it’s not in its interests to have the industry destabilised.”
If BEIS does not modify the PTRs, Abta would “have no choice” but to proceed in advising members to delay cash refunds and provide refund credit notes in their place.
Abta has also asked the government to insist airlines return to refunding customers or their agents for cancelled flights as part of any aid provided to carriers.
It said: “Government-funded assistance should be directed as a priority to the payment of refunds to trade intermediaries and the consumer.”
The CAA is responsible for enforcing the rules on airline refunds under EU Regulation 261 on air passenger rights.
The source said: “The CAA is trying to get action by the airlines by consensus first. The CAA and DfT are working with the same airlines to try to get people home and that is the priority.”
