Could refunds row lead to ‘zombie travel companies’?

A former board member of Abta has warned that the UK travel industry risks committing “commercial suicide” if the present policy on refunds is maintained.

Kane Pirie, now the managing director of Vivid Travel, warned that the trade association’s stance would mean “zombie travel companies staggering into 2021”.

British holiday companies are facing the worst crisis of modern times as a result of the coronavirus pandemic. With millions of packages cancelled since the Foreign Office warned against overseas travel six weeks ago, they are legally required to refund travellers in full within two weeks.

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But with no cash coming in, and suppliers such as airlines slow in paying out for cancelled flights, many tour operators are struggling to meet what appears to be an impossible deadline.

Their trade association, Abta, is urging members to refund travellers as soon as possible, but where this is not feasible it is recommending a “Refund Credit Note” – an IOU that specifies a date by which the cash will be paid back, unless the customer chooses an alternative holiday in the future.

Financial protection is maintained – giving the traveller certainty that, were the tour operator to fail, they will get a refund from Atol or Abta.

Initially the proposed date was 31 July, allowing holiday firms three or four months to repay.

But some companies are setting their own refund deadlines well into next year.

Mr Pirie has been campaigning vigorously for refunds by 31 July 2020. He said: “If a travel company cannot get itself financially on an even keel within six months, adding an extra year will not magically change that.

“Indeed, it will make the situation worse as several zombie travel companies will stagger on into 2021, take several bookings and then fall insolvent when their loan notes to customers become redeemable.

“This will drag out the nightmare into 2021.”

“Trust is King. Aside from the legal and ethical considerations it is tantamount to commercial suicide.”

Mr Pirie said he was considering commencing legal action against companies who have refused refunds.

A spokesperson for the travel trade association said: “Abta’s expectation is that its members will provide a refund as soon as possible.

“Abta has introduced guidance for its members on Refund Credit Notes to ensure that customers’ money is protected until the cash refund is paid, or a new booking is made.”

Separately, a London ski company is claiming that any customer who declines a Refund Credit Note will lose financial protection.

Sunweb, an Abta member based in Victoria, is telling travellers: “Please note by refusing the Refund Credit Note you will forfeit your rights to financial protection. The financial protection is directly linked to the Refund Credit Notes.

“Our guarantee funds Abta/SGR can only offer this protection if the Refund Credit note is accepted.”

This appears to be at odds with the Package Travel Regulations. The Independent has made repeated attempts to contact Sunweb for comment, without success.

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