Travel compensation fund won’t pay for another firm collapse

The high scale of the closure of Lowcostholidays last year would “dissipate” a compensation fund in place in Ireland in the event of another travel company collapse, the Irish Travel Agents Association (ITAA) said yesterday.

Nearly 4,200 Irish people received compensation of €3.8m after Lowcostholidays.ie — a subsidiary of a Spanish company — went out of business last summer.

The payouts came following claims submitted to the Commission for Aviation Regulation which bonds companies selling holidays in Ireland. The Irish division of Lowcostholidays was, however, bonded for just €79,243, according to the ITAA.

A Travellers’ Protection Fund comprised of contributions from tour operators is administered by the commission. Its reserves had totalled €5m, most of which has now been paid out to customers of Lowcostholidays.

The ITAA, which represents 100 travel agent members and 70 affiliate partners, has called on the Government to review the legislation around bonding among travel providers.

“The Lowcostholidays refunds will clear out 75% of the Travellers’ Protection Fund,” said Cormac Meehan, president of the ITAA.

“We are calling on the Minister for Transport, Tourism and Sport to meet with the ITAA immediately to review the legislation around bonding and work on the next steps,” he said.

Mr Meehan told the Irish Examiner that the impact of the Lowcostholiday payout has left the fund in an “alarming position” and that the bonding legislation needs to be updated to reflect the changes in modern tour operation.

“The current legislation is from the 1970s, pre-internet, pre-smartphones. While the commission obviously has the best interests of the trade and customers at heart, it needs legislation that is fit for purpose, not something written 40 years ago,” he said.

“The protection fund is under pressure now, another incident like Lowcostholidays would see it dissipated.

“Lowcostholidays.ie was licensed and bonded by the Commission for Aviation Regulation so we are amazed at the under-provision in the context of the thoroughness with which the regulator usually deals with our members,” Mr Meehan said.

He suggested an approach to ensure operators are properly bonded and licensed, with bonding based on passenger numbers. He said legislation review would address the issue.

“The ITAA have been pushing for a collective bond for years, among all travel agents, tour operators and airlines. We would also like to draw the minister’s attention to the organisations, within the Irish travel sector, that are not bonded with the Commission for Aviation Regulation at all,” he said.

“This area must be reviewed immediately to ensure the protection of Irish consumers. If travel agents and operators continue to be under-bonded, the shortfall will ultimately be paid by the taxpayer,” Mr Meehan said.

Lowcostholidays said it was entering receivership last July “following exhaustive attempts by the group’s directors to rescue the group which has been hampered by the recent and ongoing turbulent financial environment”.

Company administrators said the development affected 27,000 customers from Europe, taking holidays, at the time of the collapse and a further 110,000 who had booked holidays.


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