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BA and Ryanair: Customer Refunds

Volume 812: debated on Tuesday 15 June 2021


Asked by

To ask Her Majesty’s Government what discussions they have had with representatives of the international travel industry about the impact of the action being taken by the Competition and Markets Authority against BA and Ryanair regarding refunds for customers.

My Lords, the investigation by the Competition and Markets Authority into British Airways and Ryanair is ongoing. It would be inappropriate for the Government to comment on an ongoing investigation by an independent regulator, but we have been clear that the rights of consumers and the obligations of businesses remain unchanged. It should not be unduly difficult for customers to receive a refund when they are entitled to it.

One struggles to think of another product where customers pay such a high price so far in advance of receiving a service. Yet some airlines have, as the Minister has indicated, avoided making refunds when they could not deliver that service. This has left not only passengers out of pocket but has had a disastrous impact on travel agents who often have to refund their customers without receiving the fare money back from the airlines. Have the Government investigated any of the proposals from Which? that passengers who have paid in advance for their flights should have their payments held safely in trust and disbursed to airlines at the time of the flight? Does the Minister agree that a resolution to this problem is long overdue and that the actions of a small number of airlines are damaging the industry as a whole?

The Government are taking a keen interest in this issue, but it should be noted that refund issues between airlines and travel agents are a contractual matter between those two businesses. The Civil Aviation Authority does not have a role in enforcing such contracts. On the action we are taking on behalf of consumers, the CAA has reviewed airlines’ compliance on refunds. The authority did this last summer and it has since worked collaboratively with airlines to improve their performance. I am pleased to say that most airlines are now paying refunds within seven days.

My Lords, I declare an interest as someone who is owed money by both British Airways and Ryanair. I ask the Minister whether this system could be changed because there is a legal liability which is clearly not being followed. Indeed, these companies are using every trick in the book not to pay customers back. Will the Minister at least agree that this will be borne in mind when they queue up for loans and money from the Government?

I cannot comment on my noble friend’s circumstances, but the regulations already set out that if a consumer’s flight or holiday has been cancelled by an operator, that customer is entitled to a refund within a reasonable timescale. We are also asking businesses to make sure that they interact with their customers on a fair and responsible basis because that is important for the future of the travel industry. I hope that my noble friend will get his refunds, if they are due, as soon as possible.

My Lords, this issue of refunds applies to holiday lets as well as airlines and other travel providers. Does the Minister agree that if members of the public book a service in good faith and the Government subsequently change the law so that using the service becomes illegal, surely the Government should compensate those who are out of pocket—or is it only for those who have shouted loudest?

I think we can all agree that the travel industry has been fundamentally changed by the Covid pandemic. There is no doubt that travelling now is very different from what it was a year ago. We are encouraging all consumers to be as flexible as possible. They must read the terms and conditions because in certain circumstances, guidance from the Government may change and a refund may not be due. However, as I said previously, if something is cancelled, a refund should be given.

My Lords, the aviation sector has spent the past year trying to second-guess government policy, with route cancellations being announced at the drop of a hat causing mayhem, as outlined by my right honourable friend Theresa May last week. As a key architect of Regulation 261/2004 on passenger rights, I would normally take a hard line, but not today. Will my noble friend remind those in BEIS and the DfT that force majeure includes a pandemic, and that perhaps the Competition and Markets Authority might better focus its attention on reminding Ministers and civil servants of their responsibilities across departments before resorting to possible legal action?

As noble Lords will know, the Government are not taking this legal action themselves. The CMA is a non-ministerial department. It believes it has found some evidence that businesses are failing to comply with the law and it is taking reasonable steps to take appropriate enforcement action. It could be that this does not go to court and that the CMA reaches an appropriate agreement with British Airways and Ryanair, if there has been any wrongdoing. But I agree with my noble friend that we have to do everything that we can to get the travel industry back on its feet. That is our focus: we want British consumers to be able to travel once again and with certainty.

My Lords, following the Minister’s last response, while this is important, clearly it is only the tip of the iceberg for the aviation industry and its customers, as she acknowledges. Does she accept that a lengthy continuation of the green/amber/red system will have a devastating impact on the industry and its customers? Will she confirm that, when restrictions are fully lifted, barriers to flights will be removed, thereby removing this issue? Will she also confirm that it is not the Government’s policy, as some fear, to stop people travelling abroad, so as to boost the UK economy?

I point out to the noble Lord that the Government are taking a cautious approach to international travel. We realise that circumstances will change in different countries, at different times. The traffic light system in place works as well as it can, in the circumstances; it looks at case rates, positivity, genomic surveillance and the risk from variants of concern. I also make the noble Lord aware that lifting restrictions domestically does not necessarily mean changes to international travel.

It was not clear from the Minister’s response whether the Government were supportive of the suggestion put forward by the noble Baroness, Lady Randerson, which came from Which?, about payments for fares being held in a trust. Perhaps we could have a direct response to that. On this whole issue of refunds, the rights of the consumer seem to be protected somewhat tardily. I am not clear, but are the Government satisfied with the speed at which consumer rights to refunded fares during lockdown were fully addressed and, where applicable, enforced? Surely all are equal under the law and all are bound by the law, whether a financially strong airline not offering a refund or a financially stretched passenger in need of a refund.

As I have said numerous times, consumers are getting their refunds back and this is happening more quickly than it was earlier in the pandemic, as policies and practices have been put in place at the behest of the CAA and the work that it has done with UK airlines. I did not respond to the question raised by the noble Baroness, Lady Randerson, because we are considering it among many other suggestions about how to get our international travel industry back on its feet. The Government also have ongoing work on airline insolvency following the Thomas Cook insolvency in the year before last.

I welcome the action taken by the CAA. I completely understand the difficulties set out by the noble Baroness, Lady Randerson, and others; airlines and airports are suffering at the moment. But surely it is in the interests of airlines to ensure that they give passengers the best care and attention that they can. Like my noble friend Lord Balfe, I am due a voucher from Ryanair. Could the Minister address the issue of vouchers, which seem to disappear into the ether? Is there not a policy to remind passengers that they have a voucher and that it has to be used before its expiry date?

The same policy applies to vouchers as to cash payments if a flight is cancelled, but of course I cannot go into the detail of my noble friend’s circumstances. It is worth pointing out that, on 17 May, the Government published the Passenger COVID-19 Charter. It sets out what customers can expect, and what their rights and responsibilities are, when booking and travelling internationally. On the other side, we set out the reasonable expectations on the industry to be flexible. We did this to give both customers and the industry a firm footing, as we try to reopen international travel.