To ask Her Majesty’s Government what assessment they have made of the arrangements in place to compensate customers whose holidays are cancelled.
My Lords, the Government recognise the challenge consumers and businesses are experiencing regarding refunds for cancelled holidays and flights. We are clear that where a flight or holiday has been cancelled, consumers have a legal right to a refund, which must be paid. The Civil Aviation Authority launched a review into this issue, and as a consequence most airlines are now paying refunds effectively.
I am grateful to my noble friend for that reply. She will be aware that tens of thousands of passengers have complained to the CAA about inexcusable delays in getting compensation for cancelled flights, and that the Consumers’ Association has criticised the CAA, saying:
“It is obvious that the CAA does not have the right tools to take effective action against airlines that show disregard towards passengers and the law”.
Will my noble friend therefore bring in much-needed reforms to enable the regulator to take swift and effective action to protect consumers when the law is broken?
The CAA has a range of powers available to it to take a proportional and pragmatic approach to enforcement. Indeed, a number of conversations have taken place, in particular bilateral engagement between the CAA and individual airlines to encourage them to refund more quickly. The pandemic has highlighted a number of challenges and my department is keen to work with the regulator, industry and consumer groups to learn lessons and make changes in the future.
My Lords, has my noble friend observed that two holiday companies, loveholidays and On the Beach, have resigned from ABTA to avoid paying full refunds on cancellations due to Covid-19? Will she look carefully at the regulations and in particular at the alleged loophole that suggests that if the Foreign Office advises against travel and yet the company itself keeps a flight and the accommodation open, a full refund is not payable?
We keep under review the issue of Foreign Office advice and the implications for cancellation and subsequent refund. Travel is no longer the almost risk-free experience that it used to be, and I encourage all consumers when they book travel to look very carefully at whether the travel business is a member of ABTA or ATOL, and what would happen in each circumstance were their journey to be curtailed.
My Lords, while every effort should be made to compensate those whose holidays are cancelled because of the Covid pandemic, does the Minister agree that the main focus of the Government and the country should be on defeating this killer disease? With that in mind, will the Minister consider restricting all but necessary travel abroad until the virus is under control?
The Government have very solid arrangements for international travel, which is why we introduced international travel corridors to enable some travellers to go abroad, whether for business or social reasons, without needing to quarantine on the way home. Travel advice and the exemptions list can change at very short notice, and consumers must be aware of that.
My Lords, on 28 July, at col. 114 of Hansard, the Minister advised those travelling that they could mitigate their risks with travel insurance and that they should check it out, and that the Government were in ongoing discussions with the insurance industry about pandemic-related insurance cover. Today, the Which? website identifies only one travel insurance option offering cover for the cancellation of a holiday because of Covid-19 restrictions, and then only in very limited circumstances. What progress have the Government made with the insurance industry, so that the Minister’s advice in that regard is of any value?
As the noble Lord will be well aware, the insurance industry is a commercial enterprise and will offer travel insurance to consumers where it is able to do so at a reasonable cost and undertaking a reasonable amount of risk. Of course, conversations with the travel industry and the travel insurance industry are ongoing.
My Lords, some airlines have taken a very short-sighted approach by seeking to avoid repayments, but it is a sign that they are under severe financial pressure. I do not excuse their actions at all, but it is a symptom of a problem. The Government have provided tailored financial support to help the hospitality industry. When will they provide a package suitable for the travel and transport industries?
All travel companies are facing operational, resource and liquidity issues at the moment, and this is creating the backlog of refunds. The pandemic has created a very difficult situation for the travel industry and beyond, but the Government have already provided support to aviation and beyond. The Bank of England’s Covid Corporate Financing Facility has been used by airlines, which have drawn down £1.8 billion.
My Lords, I declare an interest, having had a holiday cancelled and not refunded. Does my noble friend agree that all customers across the sector should have been refunded by now and that it should not be they who are effectively making loans to solvent travel companies, many of which are simultaneously benefiting from the government support measures she has just outlined?
My Lords, I declare an interest, having had two holidays cancelled, both of which were refunded. The situation is incredibly difficult and we need to look closely at how we are going to get refunds back to consumers, but most businesses in the travel industry are doing their very best to refund.
I understand that the last time an airline operating in the UK faced a fine for breaking consumer law on refunds, delays or cancellations was 17 years ago. In the same period, as I understand it, the Civil Aviation Authority has applied for an enforcement order only once. In the light of that, is the Minister confident that all airlines have done everything they could to comply with statutory consumer rights this year, and does she think that they feel under sufficient pressure to ensure that they comply with statutory consumer rights?
I believe that airlines are feeling under great pressure from all sides at this moment. Of course, the CAA works very closely with the airline industry. Its review, which it launched at the end of July, looked in great detail at the refund policies and practices of each airline. There has been a significant improvement since that review. The CAA is taking a balanced and proportionate approach to enforcement for the time being.
My Lords, passenger compensation is an important area for consideration. So, equally, is the UK not becoming marooned. Given suggestions that easyJet is being challenged, what concern is there that the UK’s targeted commercial markets globally might not be well served, which, of course, could also impact socially? What plans do the Government have to ensure that that will not happen?
My Lords, my department is incredibly concerned about domestic air connectivity and international air travel. Of course, we want people to be able to travel, but it must be safe. That is why the international travel corridors exist and why, over the longer term, we will be looking at an aviation recovery programme that will address our connectivity more broadly.
My Lords, is there any estimate of how many people have been compensated by the insurance companies?
I do not have an estimate of how many people have been compensated by insurance companies, but I can tell noble Lords that the Competition and Markets Authority is another way that consumers can report businesses which are acting unfairly, and it has received tens of thousands of complaints. For example, action arising from those complaints resulted in TUI agreeing to refund all customers who were owed a refund by the end of September.
My Lords, I declare an interest, having had a holiday cancelled. Does my noble friend agree that while the ATOL scheme is excellent, waiting 90 days to receive repayment is far too long, and will she join me in condemning British Airways for its appalling, obstructive attitude towards making repayments?
The ATOL scheme is very valuable and exists as a safety net to enable people to get their money back if they cannot do so from other sources. While it may take 90 days, consumers can feel reassured that they will get their money back eventually.
I, too, have had a holiday cancelled, and I have been from one organisation to another. The credit card was supposed to cover it; it did not, and nor did the travel insurance. ATOL has not replied, nor ABTA. Cannot we have simple, clear guidance to all those claiming so that they know exactly where to go and can save an awful lot of trouble and harassment?
The issue for consumers is that different bookings using different travel agents will be supported by different mechanisms, so there cannot be a one-size-fits-all solution. However, there are a number of places that consumers can go to for advice. For example, back in April, the Competition and Markets Authority put out guidance on cancellations and refunds. It was also clear that the airlines had to state clearly in what timeframes those refunds would be provided.
My Lords, all supplementary questions have been asked and we now move to the next Question.