My Lords, in the Government’s Oral Statement on Monarch Airlines of 9 October, the Secretary of State said that,
“right now our efforts are rightly focused on getting employees into new jobs and getting passengers home. After that, our effort will turn to working through any reforms necessary to ensure that passengers do not find themselves in this position again. We need to look at all the options—not just ATOL, but whether it is possible to enable airlines to wind down in an orderly manner and look after their customers themselves, without the need for the Government to step in. We will be putting a lot of effort into that in the months ahead”.—[Official Report, 9/10/17; Commons, cols. 27-28.]
The demise of Monarch Airlines, along with the Secretary of State’s Statement, has raised questions about the current UK financial protection regime generally for air travellers. The ATOL scheme is intended to ensure that those who purchase ATOL-protected flights and holidays are flown home at no extra cost if an ATOL company fails. However, the scheme does not offer that protection to customers who buy airline seats from airlines which are not within the ATOL scheme.
The Government have estimated that the proportion of Monarch Airlines passengers affected who were covered by the ATOL scheme and ATOL protection amounted to some 10%7 to 15%. As we know, the Government decided to step in and repatriate Monarch’s passengers regardless of whether they were among the small minority who were protected by the ATOL scheme, a decision which would appear at least to raise questions about the current scheme and arrangements.
While this Bill will update existing powers to enable different and separate arrangements to be established to align with new practices, such as linked travel arrangements, there remains a gap in consumer protection for flight-only seats sold by airlines, despite—I understand, perhaps incorrectly—the industry and the CAA’s previous calls for such a protection regime. The Bill does nothing to address that gap.
The amendment, whose intention has the support of ABTA, would through its proposed deletions to the 1982 Act provide an opportunity for the Government to say how they intend to review and update the existing arrangements and regulations, particularly in respect of flight-only travel under the Civil Aviation Act 1982, to ensure the protection of passengers in the event of a future airline failure—which as I understand
it from the Secretary of State’s statement of 9 October is, at least in part, what the Government intend and want to do.
It is really a matter for the Government, in consultation with the industry and consumers, to determine the precise framework and model for delivering any new protection regime. The Government appear to be looking for a new arrangement which would ensure that passengers in any subsequent Monarch situation are flown home at no extra cost but at the lowest possible cost to the taxpayer and, presumably, to the airlines in particular and the travel industry in general.
A substantial proportion of the failure costs incurred in the ATOL scheme over the years has related to airline failures: Clarksons with Court Line; Laker and Arrowsmith Holidays with Laker Airways; ILG with Air Europe; XL Leisure Group with XL Airways; and now Monarch Travel Group with Monarch Airlines. These failures have also led to significant costs being incurred either by customers not protected under the ATOL scheme or by the taxpayer. Travel companies are also affected by the failure of an airline as they are liable for all aspects of a package holiday under the package travel regulations. While the exclusion of airlines from a scheme of protection means that their customers are not protected against financial loss, in practice those passengers—both British and those in other European countries such as Italy and Germany—have been repatriated at a cost to taxpayers and other industry participants. This surely adds to confusion when failure occurs, particularly around what is and what is not protected under the ATOL scheme. There is also a lack of clarity around the meaning of the ATOL-protected branding and ABTA has consistently called for it to be made much clearer that ATOL protection applies only to a particular set of holiday arrangements rather than the company as a whole.
The amendment is designed to provide the Government with the opportunity to say how they will end the area of exposure to the Government, passengers and taxpayers caused by unprotected airline seat-only sales, and to consider what a new regulatory framework might look like in the event of insolvency. In so doing, it would also enable the Government to fulfil the Secretary of State’s commitment of 9 October to,
“look at all the options”,
and,
“ensure passengers do not find themselves in this position again”.
The Government have said they are going to consult and look at all the options as part of the process of,
“working through the reforms necessary to ensure passengers do not find themselves in this position again”.
Indeed, the Government said in their 9 October Statement that they would be putting a lot of effort into this,
“in the weeks and months ahead”.
More than two weeks since that Statement, have the Government made official approaches to the industry and consumers with a view to commencing consultation about the sorts of mechanisms beyond ATOL which could be implemented to address the issue and consequences to passengers of future airline insolvency? What will be the timespan of such consultation? Which organisations, companies and bodies do the Government
intend to consult, and who from beyond and outside the industry do they also intend to approach? Finally, by when do the Government expect to reach conclusions about the actions and changes they intend to make to deliver on the Secretary of State’s promise following the demise of Monarch airlines that,
“passengers do not find themselves in this position again”?
Presumably that commitment was not made without at least some idea of the possible ways of achieving that particular goal.
We certainly cannot continue with a situation where nobody is sure whether the Government will or will not fly people back home in future at no extra cost in the event of another airline failure, and where there is also an apparent lack of clarity for many passengers and potential passengers under the existing arrangements and ATOL scheme about their rights or lack of rights and their protections or lack of protections. In moving my amendment, I express the hope that the Minister will be able to give some answers to the points and questions I have made and asked in the light of the specific commitments given by the Secretary of State on future objectives and intentions in his Statement of 9 October. I beg to move.