Civil Aviation Bill (Committee Stage) - amendment no. 36
Lord Faulkner of Worcester moved Amendment No. 36:
Page 11, line 46, at end insert—
""71C AIR TRAVEL TRUST: CONTRIBUTIONS BY AIR CARRIERS AND TOUR OPERATORS (1) The Secretary of State may by regulations make provision requiring contributions to the Air Travel Trust to be made by air carriers and tour operators, not limited to applicants for licences by virtue of section 71. (2) Regulations under subsection (1) may vary the terms of the Air Travel Trust to protect payments made by all air travellers, including— (a) those travelling with holders of Air Travel Organisers Licences, and (b) those travelling with air carriers or tour operators which are not holders of Air Travel Organisers Licences.""
Like the noble Countess, I, too, return to a subject which I raised on Second Reading. The two amendments tabled in my name and that of the noble Baroness, Lady Flather, seek to provide protection for air travellers from the financial consequences arising from the collapse of an airline or tour operator. The amendments are similar, but not identical, to amendments tabled in the other place at earlier stages of the Bill and seek to give effect to the strongly held views of the CAA, the traditional tour operators, ABTA, AITO, reputable airlines such as Virgin, the Parliamentary All-Party Group on Consumer Affairs and Trading Standards and the professional body representing trading standards officers. All of these organisations were disappointed by the Government's decision, announced in the other place and confirmed by my noble friend at Second Reading in this House, to reject the CAA's advice to establish a levy to protect air passengers so that if a tour operator collapsed prior to departure, they would get their money back or, if abroad, they would be brought home at no cost.
I do not intend to repeat the arguments I used on 1 November at Second Reading. However, if the Committee will allow me, I want to pick up on some of the points made by my noble friend in his speech. His first point was that the Government should not compel citizens to protect themselves against the failure of an airline and that there was no logical reason why the state should organise refunds for any one particular group of customers. The answer, of course, is that they already do exactly that via the current ATOL regulations. Eighteen million package tour customers every year are protected, compulsorily, against their tour operator failing.
I do not intend to repeat the arguments I used on 1 November at Second Reading. However, if the Committee will allow me, I want to pick up on some of the points made by my noble friend in his speech. His first point was that the Government should not compel citizens to protect themselves against the failure of an airline and that there was no logical reason why the state should organise refunds for any one particular group of customers. The answer, of course, is that they already do exactly that via the current ATOL regulations. Eighteen million package tour customers every year are protected, compulsorily, against their tour operator failing.
My noble friend went on to argue that although the levy would reduce the difference in protection given to package and independent travellers it would not eliminate it altogether. There would still be a two-tier system as those who assembled their own packages would have cover for their flight but not for loss of accommodation or car hire. It is true that the £1 levy proposed by the CAA would not have eliminated the difference in protection altogether, but the accommodation and transfer portion of many independently booked packages is protected as non-licensable turnover by various DTI-approved bodies, trust funds and insurance, as required by the 1992 package travel regulations.
The adoption of the £1 levy would have gone a long way towards extending financial protection to the vast majority of overseas travellers. It would have been especially valuable in providing repatriation for those unlucky enough to be stranded abroad. The proposed levy would therefore not replace one imbalance with another but would increase overall consumer protection and level the playing field between tour operators and the airlines.
A further argument against the levy was that the same £1 would purchase cover for the traveller who buys a low-cost flight to Europe for under £30 as for the traveller who has booked a two-week package in the Far East or the Caribbean. The words my noble friend used in this context were:
"The budget traveller would pay a much higher percentage of his outlay to ensure that there is enough money in the pot to refund to the long-haul package passenger should his tour operator fail".
My answer to that is that £1 is a pretty cheap price to pay in order to guarantee financial protection and repatriation, particularly when you compare that with the £15 to £30 per person per sector currently being charged in fuel supplements by the airlines and the £3.50 to £4 per return flight charged by the no-frills airlines when credit cards are used to purchase seats. It is also very cheap compared with buying an insurance policy to cover airline failure.
I am sure my noble friend will not mind my quoting him, but it is important that we counter these points. He went on to say:
"The Government are committed to reducing regulatory burdens on business and to regulate only where necessary and in a light-touch manner. A levy is a heavy-handed instrument to solve the problem of informing a population that has easy access to a multitude of information sources which are increasing continually".—[Official Report, 1/11/05; col. 132.]
But it is hard to imagine a lighter touch than a £1 levy. A pound does not even buy you a bus ticket to go a short distance in London. The problem is that the CAA has proved through its own research that over half of all travellers believe that they are covered when booking a flight direct with the airline when in fact they have no such protection.
The CAA also says that only a tiny proportion of travel insurance policies—around 5 per cent—cover insolvency. The Foreign and Commonwealth Office tells us that 50 per cent of travellers take out no travel insurance at all, let alone the specialist type of insurance that includes airline insolvency.
At Second Reading, both my noble friend and I referred to the collapse this summer of EU Jet. I have re-read the CAA's 14 page report on this unhappy incident and the conclusions I draw from this are rather different from those who are opposed to the CAA levy. The report makes clear that the much-discussed £25 tickets supposedly offered to EU Jet customers were not generally available and, indeed, the average price paid per passenger to get home was an additional £100. Indeed, many people had to pay much more than that. They had to pay hundreds of pounds to other airlines just to get back to the UK, let alone to Kent, from where they originally set off.
One would have much more confidence in so-called voluntary arrangements if the airlines had a better record on customer care. They already overcharge—indeed, they profiteer—when their customers pay by credit card, a method of payment which does offer some financial protection, and they mislead passengers by quoting artificially low prices that are subsequently augmented by airport taxes, security charges and fuel supplements.
Since Second Reading in this House, there has been one interesting development. On 17 November, the CAA announced that it was setting up a review of ATOL bonding. The terms of reference contain this sentence:
"To consider moving from bonds to a single per customer transparent levy to build up a fund, encompassing the Air Travel Trust Fund, for meeting ATOL holders' refund and repatriation obligations".
So it seems that the principle of a levy per passenger is back in business. If it is no more than £1 per trip, and if the fund is allowed to build up over, say, 10 years and the Government are willing to underwrite it as it gets established, it could be a great step forward and less of a burden on tour operators than the existing ATOL bonding.
But what it does not do is provide any sort of protection for flights bought direct from the scheduled airlines or via their websites with debit cards. If we are to protect them, we need a levy on all passengers leaving the UK by air. Virtually everyone I have spoken to involved in this business believes that that kind of levy is what is required, and that is what my amendments seek to bring about. I beg to move.
© Lords Hansard 8 December 2005