Air Travel Organisers’ Licensing Bill

Lord Flight Excerpts

2nd reading (Hansard): House of Lords
Tuesday 5th September 2017 Lords Chamber

[Lord Flight (Con)]

My Lords, I pay tribute to an extremely clear summary of the positive reasons for ATOL, which my noble friend Lord Callanan has just described. I am not quite sure why a colleague suggested that I should speak in this debate—whether it was because of my surname or because somebody knew that I was one of the first people to benefit from ATOL. Some 43 years ago, I was on a holiday organised by Horizon when it went bust. Luckily, ATOL had come in a couple of years before and dealt with everything extremely well.

My noble friend Lord Callanan made the important point that this is also very sensible commerce. ATOL has been one factor underpinning the UK being a leader in the holiday industry and the changes coming through will strengthen that. There is no need for lengthy debate: there is cross-party support for this practical legislation which is good commercial news. The Bill updates ATOL cover to include online booking and booking involving separate organisations. It extends its scope and meets the requirements of the EU package travel directive. It extends consumer protection beyond the traditional package holidays organised by tour operators to include combinations of flights and accommodation booked at the same time, which, as my noble friend pointed out, are now some 75% of the market.

It is particularly positive that the Bill, combined with the EU directive, should be extremely good news for UK holiday companies within the EU, as they will be offering a much better overall package than any other category of company. The improvements and extensions of ATOL will add to that. The protection provided is compensation for loss of holidays where the airline or air transporter goes bust, and the return of the cost of travel and accommodation if that has been lost. It is clear that ATOL applies only where there is flight transport. It is not entirely clear on the coverage of other items such as hotel accommodation or even taxi transport, but it is implicit that compensation will be made if these have been paid for and lost.

I shall focus on two other aspects of travel insurance where compensation is a difficult issue and needs review. Two recent cases—one personal and one relating to a friend—illustrate my point. I was scheduled to visit Burma, but a back operation had unfortunately not been successful and I had to have another at relatively short notice. The surgeon advised that it was not sensible for me to go. I had taken out travel insurance, but the insurers had a bit of illogical small print which questioned whether I was covered; I continue to fight the case. The provider of the Burma trip offered no compensation for my having to cancel. Its insurance arrangements did not cover anyone who had to withdraw because the plane was chartered, not a regular service. At present, the compensation arrangements are not operating satisfactorily when people have to cancel a flight or holiday for health reasons.

In the second case, the son of some friends broke a ligament in one leg during school sport. The whole family had to cancel their holiday but they were advised that there was no compensation for loss of the air tickets because they had originally been bought via a charter arrangement, not a regular package.

Therefore, there is a need across the industry for arrangements for protection against having to cancel a flight, whatever the cause, and standard insurance cover might best be automatically provided by the party organising the flight at the time of purchase. In the case of cancellation as a result of illness, again one might look at obliging airlines to refund up to 90% of the cost and potentially to build a specific charge for this extra protection into the cost. As my noble friend Lord Callanan pointed out, the Bill enables the Secretary of State to establish different protection trusts to cover different requirements.

It is interesting that the UK has made constructive use of public sector provision combined with private sector provision in this sort of area, where insurance companies complain that it is very difficult to provide the same cover unless a standard requirement is laid down by government. I can think of two other areas in different contexts where the state organises standard insurance cover. As my noble friend Lord Callanan pointed out, this is an interesting example of where the UK industry should do even better in the EU notwithstanding Brexit as the service we have to offer will be highly competitive vis-à-vis that provided by other countries.

To conclude, this is an important area in commercial and human terms. I trust that the Government will keep under review other aspects of travel insurance such as those I have described, which need better organisation than they currently have.