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House of Lords Hansard

Air Travel Organisers' Licensing Bill

25 October 2017
Volume 785

    Report

    Clause 1: Air travel organisers’ licences

    Amendment 1

    Moved by

  • 1: Clause 1, page 1, line 3, at end insert—

    “( ) In subsection (1)—(a) in paragraph (a) omit “or (1B)”;(b) in paragraph (b) omit “or (1B)”.( ) Leave out subsections (1B) and (1C).”

  • 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.

  • My Lords, I have added my name to this amendment because I felt that it raised some important issues for the Government to look at. I also felt it would be genuinely useful if the views of the Government on the progress made so far were put on record.

    At the time of the failure of Monarch Airlines the Minister, in his Statement to the House, emphasised that it was the largest repatriation since D-day. But I put in contrast what the airline industry said in my discussions with it: that Monarch was a small airline and that the problems would arise if a big airline were to fail. Of course, those I spoke to believe that their whole industry is in robust health and that Monarch is definitely not an example of its state generally. The point is that, as the noble Lord, Lord Rosser, has just said, airlines have failed before and undoubtedly, at some point in future, something like this will happen again.

    We are looking here at whether the Government have set some kind of precedent by bringing everyone back, for understandable and excellent reasons. I think everyone supports the way that was done and the reasons for doing it. But the point is that if and when it happens again people will expect a similar response and, for that to be possible, there needs to be a scheme. The consumer understands that there is a need for a scheme and understands the ATOL scheme. What the Monarch passengers probably did not understand was why some of them were covered by something and others were not. In the end, the Government need to look at the new ways of working—the new ways in which travel is offered—and present a new scheme which covers them. In the days when the ATOL scheme was devised, package holidays covered a huge percentage of the market. That is very much less the case now.

    It is also important to look not just at the passengers who are affected by this. One airline’s failure can often adversely affect a number of package holiday operators. If one airline fails, several package holiday operators will find their business seriously affected. There is a serious knock-on effect within the industry from this and it needs to be addressed. I shall listen to the Minister’s answer with interest.

  • I thank the noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, for their contributions and for the constructive way that they have approached the Bill. I am extremely grateful to them and I recognise the purpose of Amendment 1 —to ensure that ATOL protection covers flight-only bookings made through airlines—but the simple fact is that the proposed amendment would not achieve that aim.

  • Let me explain further. Section 71(1B) of the Civil Aviation Act 1982 acknowledges that airline operators are already subject to separate licensing requirements. The EC regulations on airline operating licences, which include safety and financial considerations, apply across the EU and its member states. Individual member states do not have discretion to impose additional requirements. As EU airlines are already licensed to carry fare-paying passengers, requiring airlines to obtain an ATOL for flight-only sales would be inconsistent with EU law. If the aim of the noble Lord and the noble Baroness is to bring airlines within the ATOL scheme, this amendment could not achieve that because airlines are exempt. The existing position reflects the requirements of EU law, and the UK is not able to extend ATOL protection to airlines without breaching EU law. Therefore, the provision to exempt airlines from ATOL would need to be retained in secondary legislation, even if this amendment were successful and Section 71(1B) were removed from the Civil Aviation Act 1982.

    Alternatively, if the aim is to legislate against consumer detriment caused by potential future airline failures, I do not think that this Bill is the appropriate vehicle to achieve that. The current modernisations for the ATOL scheme in this Bill are, as we have discussed in separate conversations, driven by innovations in the way that holidays are sold by the travel market. They will also ensure that the scheme is aligned with the updated EU package travel directive 2015. The Government have followed the recognised process of reviewing, proposing, consulting and revising. Nevertheless, now and going forward, we shall give full consideration to how the Monarch failure happened and to what can be done to guard against that kind of issue happening again. We need to look at all the options, not just ATOL, but at 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. These are complex topics, and it is right that we explore them fully before legislating.

    These and other topics will be explored in the forthcoming Green Paper on consumer protection to be issued as part of our aviation strategy, and I invite noble Lords to share their views in that process. The noble Lord, Lord Rosser, asked about the timescale. The Government’s initial consultation setting out the elements of the aviation strategy closed last Friday, but he should not worry because we are coming on to the separate bits as well. We are now considering the responses and developing proposals. The final strategy will be published in 2018 and in the coming months we will seek views on consumer protection in the first paper. By following our tried-and-tested procedure of review, impact assessment and consultation, we feel confident that we can produce a robust proposal.

    In summary, if the concern is that consumers who buy flight-only sales will not be protected should their airline go bust, the ATOL scheme does not extend to that type of sale. This amendment could not change the existing position for flight-only sales for the reasons I have just set out. However, we are reviewing consumer protection in the aviation sector as a whole through our aviation strategy, and it will take on board the lessons learned from Monarch, which is entirely consistent with the statements I made then. Therefore, I hope that the views I have given the noble Lord will allow him to withdraw the amendment.

  • My Lords, I thank the Minister for his response and the noble Baroness, Lady Randerson, for her helpful contribution to the debate.

    I think I made it fairly clear—and the Minister accepted it—that in moving the amendment the principal objective was to try to get some more information from the Government about how they intend to progress the consultation. I do not intend to ask the Minister further questions as we are on Report, but those in the industry and, one assumes, consumer organisations will take considerable interest in what he said and, perhaps, in what he did not say in his response. There was a very clear, specific commitment by the Secretary of State—which I do not doubt the Government will seek to adhere to—that they would work through any reforms necessary to ensure that airline passengers do not find themselves in this position again of being stranded.

    It is presumably incumbent on a Government making that kind of specific commitment to get the consultation under way as quickly as possible, to make it wide-ranging and to come to conclusions reasonably quickly. After all, if we get another incident like Monarch, and changes have not been made to the procedures and arrangements which ensure that passengers do not find themselves in that position, a number of organisations within the industry and consumer organisations, as well as us, will be asking the Government why they did not act earlier and more quickly.

    I mean it when I say I am sure it is the Government’s intention to seek to resolve this issue, and I do not doubt that it is their intention to seek to consult widely or to seek to deliver on the very specific commitments given by the Secretary of State in the Statement of 9 October. However, I beg leave to withdraw the amendment.

  • Amendment 1 withdrawn.

    Amendment 2

    Moved by

  • 2: After Clause 2, insert the following new Clause—

    “Ensuring transparency of consumer protections

    (1) Section 71 of the Civil Aviation Act 1982 (regulation of provision of accommodation in aircraft) is amended as follows. (2) After subsection (1D) insert—“(1E) The Secretary of State must, within the period of 12 months beginning with the day on which the Air Travel Organisers’ Licensing Act 2017 is passed, make regulations to ensure that consumers are informed of their protections when purchasing flights, package holidays and linked travel arrangements.(1F) Such regulations must provide that before the sale of any flight, package holiday or linked travel arrangement is completed, the retailer must make the consumer aware of what protections, if any, apply to their purchase in the event that the retailer, or the provider of the flights or accommodation, ceases trading.(1G) In this section—(a) “retailer” means a provider of flights or overnight accommodation, either directly or as a third party;(b) “protection” means any scheme available to the consumer in the case that the retailer ceases trading;(c) schemes referred to in paragraph (b) may result from the retailer or providers holding a licence under this section, the consumer completing the purchase with a credit card, or any other means that the retailer is aware of.””

  • My Lords, I have taken the opportunity in this amendment to press the Minister further on the information to be supplied to consumers. The key question is how “linked travel arrangements” would work in practice. I believe the EU directive refers to facilitating a purchase and am interested in the definition of how one website might facilitate a purchase of something from another website. For example, is advertising facilitation or does there have to be a closer link? If there does, how does that get translated into information on the screen that is clear to consumers? My interest is in consumers being able to know the difference.

    In the last few days I have done a significant amount of research of a very practical nature. I have been on a lot of websites and booked notional holidays aplenty. My inbox is now of course alive with the reaction of the internet to my searches, and I shall definitely regret this research in due time. I have been trying to tie down those offers I receive online to what would be called a linked travel arrangement: flights here being offered possibly with a hotel there, and the two being financially dependent on each other in one way or another, rather than just a chance advert. There are adverts that come into your inbox because Google knows what you are doing. I have gone on to an airline website, and Google knows I have done that, so it sends an advert telling me that there are wonderful offers for hotels or car hire, the usual two options—it might send you an email or it might be an advert that comes at some point on the screen. Rather disconcertingly, you can be looking for a book on a website and suddenly find you are being offered a hotel there that relates to your previous search. It happens to us all the time now. Yesterday I saw, in the middle of flight information on the screen, an advert for a hotel. Clearly, the advert for the flight had been designed to accommodate the hotel. Is that a linked travel arrangement? The point I am making is that if I cannot work it out, I dare say a lot of consumers will not be able to either.

    It is essential that consumers are given clear information—in large print, not small. ATOL-protected holidays are admirably and clearly stated to be so. I am seeking from the Minister information on how we might get similar wording for any future designation.

  • What the noble Baroness is saying is very worthy, but is it not a bit academic in the light of the Government’s statement yesterday that five London airports will be completely full up by the 2030s and that there is very little chance of rectifying that, despite some of us warning of this for the last four or five years?

  • The Minister has already referred to the importance of an airport strategy, and the Government are working on that. As the noble Lord states, there is clearly an interrelationship between the availability of flights and the availability of package holidays.

    We need clear wording akin to the words used in the ATOL protection. That phrase “ATOL protection” works because over many years the consumer has come to understand what it means, partly through government advertising, partly through the work of consumer groups and, sadly, partly through the hard lesson of the failure of holiday companies. We need similar clear wording for any new scheme, and I fear that “linked travel arrangements” is not a phrase that trips off the tongue or that will be instantly understood by the holiday-buying public.

    I turn to an issue that I have raised before: the variation in protection between credit cards, debit cards and PayPal. We might want to pay for a flight by debit card because in many cases, using a credit card costs additional money—a fee for the privilege of using it. However, it is important that at the point where consumers choose how to pay, they are warned that if they pay by debit card they will not get the same protection as if they pay by credit card. It is important that we modernise the system. I am not sure that this Bill is the place to do that, but it is important that the Government take the point away and look at it.

  • My Lords, I add our support to the amendment moved by the noble Baroness, Lady Randerson. I do not intend to go through all the points she has so ably made, but I share her view that there seems to be a lack of clarity over the rights and protections—or lack of them—available, as the amendment says, to those,

    “purchasing flights, package holidays and linked travel arrangements”.

    Certainly, in some adverts, to which the noble Baroness, Lady Randerson, has already referred, the situation is not made clear. So we agree with the objective of the amendment, which is designed to make much clearer for people, when booking flights, package holidays or other travel arrangements, exactly what their rights are and are not, and what protections are and are not available.

  • Before I turn to the subject of the noble Baroness’s amendment, which is about information to consumers, let me go through again the business of linked travel arrangements, which I know is causing some confusion—not least to us in the department. As I said to her when we discussed this privately, it was inserted into the directive and a lot of work is going on to work out what it actually is.

    The package travel directive has broadened the scope of a package, so it is now clear that protection should apply when customers book customised combinations of travel online. As the noble Baroness outlined in her speech, it is not at all clear what a linked travel arrangement actually is. It is obvious if there is a direct advertisement on a flight website for a linked hotel and that hotel is promoted by the airline directly and is on the same web page. That, it seems to me, is an obvious linked travel arrangement. However, as we know, and as the noble Baroness has discovered in her meticulous research, on the internet, many adverts on webpages have no connection whatsoever with the originator of the webpage. They are placed by advertising companies, principally Google, among others, and the originator of the page has no idea what adverts are appearing on their page. So if you click on an associated advert, that would not necessarily be a linked travel arrangement, but how is the consumer supposed to differentiate between those two things?

    Those are the issues we are grappling with at the moment: trying to come up with a definition of a linked travel arrangement and to implement it in regulations. As the noble Baroness said, the directive introduces information provisions to ensure that consumers have a good awareness of the kind of product they are buying, and we are consulting extensively with the industry to try to ensure that that is the case.

    Turning to the subject of the amendment, I recognise the purpose of the proposed new clause and the need to ensure that consumers are better informed about consumer protection when they make a booking. This is well-intentioned and entirely in keeping with the Government’s wish that passengers should have a robust level of protection, and that their rights should be communicated to them in a timely and clear way.

    However, I do not think that this is the right approach at this time. Let me explain why. First, we need to be mindful that package holidays and linked travel arrangements often do not involve a flight. They could involve a journey by road, rail or sea, so the Civil Aviation Act 1982 is not the most appropriate place for such an obligation. The UK already has regulations in place through the package travel regulations, which cover package holidays across all modes. We are in the process of updating these regulations alongside the Bill to extend them to cover linked travel arrangements, in line with the EU package travel directive.

    This brings me to my second point. The new clause would unnecessarily duplicate the new information requirements in the EU package travel directive. The directive has introduced new information provisions which are designed to improve information for consumers. This sets out the specific information that must be provided to consumers about the type of product they are buying and the corresponding level of protection. This must be provided to the consumer both before and after they buy a package or a linked travel arrangement. We have recently completed a consultation on the directive, which proposed that the information provisions will be brought into force in 2018, through changes to the package travel regulations. We are also planning to retain the ATOL certificate alongside these new requirements to help reinforce awareness of consumer protection.

    Finally, I fully accept the need to understand the lessons learnt from the Monarch failure, which I outlined earlier to the noble Lord, Lord Rosser, and to respond in the right way. We have to understand the issues that need to be addressed and whether we can make sensible changes to the laws. That is why we are undertaking an internal review, so that we can bring forward solutions that are feasible and have been assessed as being practically enforceable. As the Secretary of State said in his statement in the other place:

    “I do not want us to rush into doing something without doing the ground work properly. We need to look carefully at what has happened, learn the lessons and make any modifications necessary. I assure the House that that is what we will do”.—[Official Report, Commons, 9/10/17; col. 40.]

    It is quite possible, of course, that additional information requirements will follow from that review, but it is important that we consider the options and ensure that the steps we take are the right ones and that they both work in the UK and are compatible with EU law.

    I therefore believe that an amendment to introduce legislation of this nature—however well-intentioned the noble Baroness is—is premature. So, in summary, if her concern is that the Government are not taking steps to ensure that consumers are informed about consumer protection when they book a trip, I hope she can take comfort that we are ready to make provision through the package travel regulations and the ATOL certificates to do just what she has asked for. In addition, we will of course also consider consumer awareness as we review the lessons learnt from Monarch and, as I said earlier, as we develop our aviation strategy. Therefore, in the light of the assurances I have been able to give her, I hope the noble Baroness will withdraw the amendment.

  • I thank the Minister for his response. I will certainly watch carefully as the Government respond; I am sure that they are working hard on this. My concern is largely with the consumer, but it is also with travel operators, because it is important that they be able to succeed as much as possible. Consumer confidence is an essential part of that. A simple sentence on a website saying that it is a particular type of arrangement is cheap, easy to organise and involves minimal effort for the companies concerned. It is an easy way to provide additional confidence for consumers. Having said that, I am happy to withdraw the amendment.

  • Amendment 2 withdrawn.