Air Madrid and Club Air have ceased operations in the busy Christmas season last year. Despite the failure of more than 50 airlines reported since 2000, there is still no mechanism in place protecting customers in…
Air Madrid and Club Air have ceased operations in the busy Christmas season last year. Despite the failure of more than 50 airlines reported since 2000, there is still no mechanism in place protecting customers in such events.
When airlines go bankrupt or cease operations, passengers have currently no recourse against the airline to recover the money of their unused ticket or to obtain repatriation if they are stranded abroad. According to a study mandated by the European Commission, 50 airlines went bankrupt in the 5 year period between 2000 and 2005, leaving more than 63.000 passengers stranded abroad without a return ticket. This does not include those passengers, that have not yet started their journey and whose tickets have become worthless. The study concludes that there is an increased risk of bankruptcies in recent years and that there is a case for introducing passenger protection mechanism in this area.
According to ECTAA, the European Commission has not taken any firm action in this respect. It currently proposes to make stricter controls of air carriers’ financial soundness. However, this does not prevent financial failures and provides no protection of customers’ money.
ECTAA regrets that IATA does not automatically set up escrow accounts for the refund of passengers’ money in case an ailing airline goes bankrupt. In the case of Air Madrid, agents were forced to settle the November sales of 30 million $ and 2 hours after the money was transferred, the airline announced the suspension of its operations, Jan Van Steen president of ECTAA said.
An industry solution had been developed in earlier years under the aegis of ECTAA and IATA to protect passengers against the default of an airline or agency default against a small fee raised on each ticket processed through the BSP. However, following the strong objections from airlines, the passenger protection plan was abandoned.
Jan Van Steen added “The suspension of Air Madrid’s and Club Air’s operations has been the last straw. We need a contingency plan for our customers in order to provide adequate protection in case of an airline failure.”
He further stressed that “there is a big consumer protection gap. While IATA agents are required to provide bonding and tour operators need to provide financial guarantees under European legislation to protect customers against their financial failure, there is no such protection afforded by customers against airline failures.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
