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Travel, Tourism & Hospitality Community

Customer Refunds, Credit notes and Covid-19 vouchers

Author: Nikki Spoor

Published: 24 Apr 2020

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Please accept my apologies for the lack of blog postings from our community. As ACA's in our industry we have been inundated with the financial firefighting since the onset of implications from Covid 19. That together with the excellent hub on Covid19 providing up to date news meant blogging was pushed down the list or urgent needs.

With the amount going on and the ever increasing challenges to tour operators, travel agents and airlines my clients have understandably been keeping me very busy, as have my other community colleagues in this sector. I have decided to post a blog on the issue of consumer refunds, as this is the media driven thorny issue that is being driven by both disappointed consumers, decimated industry and a lot of misunderstanding. The regulatory and commercial environment was not intended for this type of pandemic worldwide situation and the travel industry was the first industry to be affected and will no doubt be the last to come out of this economic situation. The first few weeks the tour operators were concentrating on repatriating their clients stuck abroad, whilst trying to fend off regulators, merchant providers, suppliers, banks, whilst coming to terms with the fact that their business was in ruins and had no end in sight as to recovery. The government launching the furlough scheme was a job saver and quite frankly something I never thought would happen.

Since the initial shockwave and the 14 days after the first cancelled trips the issue of client refunds has been obviously in the spotlight. Under the European Regulations EC261/2004 and the EU Package travel Regulations if a flight or trip is cancelled the airlines have 14 days to fully refund the customer, 7 days if it is flight only, and the tour operators and travel agents also have 14 days. The EU and majority of other EU Governments introduced emergency legislation allowing the issuing of vouchers that allowed the consumer to continue having consumer protection on their monies and to allow tour operators to remain in business. The UK did not follow suit and the airlines did no such refunds. Tour operators, unless they have a vertical integration airline in their operations, receive client monies and have to pay the airline immediately on booking a customer holiday. In a package a tour operator will have differing terms on ground arrangement supplies (hotels, other accommodation, transfers), but broadly they will have to pay perhaps 8 weeks in advance of departure. Therefore if the airlines are not repaying client monies, the other suppliers are also not repaying the monies and there are no continuing lines of income how are the tour operators going to pay cash refunds ? The tour operators want to be able to repay customers and it is not as has been said that they are spending the customers monies on their overheads. I have seen the industry referred to as a ponzi scheme - this industry is one of the most heavily regulated industries in the UK. The problem is the airlines are not under the same heavy set of regulations and even the regulations they are under they are not adhering to. The airlines started issuing "vouchers" to clients and trying to do via tour operators as well - those vouchers as soon as the client accepted carried no consumer protection. If the clients refused the vouchers a large proportion of them could reclaim their monies via their credit card companies (if they booked the holiday on credit card) who would have to provide refund within 28 days after investigation. If you agreed to a voucher then you would have no such continued consumer protection. This is why the industry has been lobbying government to make the same emergency changes to the Package Travel Regulations as the rest of EU. This has been confused with Tour operators lobbying to not pay customer their refunds, which has not happened. This has lead to currently the industry regulators advising that a credit note issued would continue to be covered for consumer protection and clients who have been issued with these continue to be consumer protected.

I totally understand why customers want refunds, but the tour operators cannot do this without the leaders of the chain being airlines taking that lead. The tour operators and travel agents took the brunt of the Thomas Cook failure and that was beset with regulators overlooking their poor financial state for years. The tour operators provided flights at their own cost to consumers when they had already paid Thomas Cook Airlines for the flights. That after 2 years of Brexit uncertainty had left them pretty exhausted. As soon as Covid 19 started the other financial stakeholders in the travel industry like the regulators, banks, investors, and merchant providers have all been circling trying to protect their interests. What you are going to see is unfortunately failures, which might have been less had the CBILS loans been more forthcoming. The expectations as to what the tour operators and travel agents can do, with the current cards they have been dealt, is quite frankly impossible. What I do believe is that as a consumer you are more likely to get a refund at speed from your regulated tour operator/travel agent, once they have been allowed to respond properly, than you will do if they go bust and you wait for regulators to pay you. Some customers are still awaiting refunds from Thomas Cook 6 months later.

ABTA has some really good articles on this issue and what the industry is facing.

The views expressed are the author’s and not ICAEW’s.