First let me declare an interest
I have previously criticised Abta for no longer financially protecting customers. At Abta Convention in Marbella in 2006 I explained that Abta was moving to a structure that would disenfranchise travel agents.
Travel Counsellors left ABTA in 2004 and set up its own trust to financially protect customers.
An explanation of some of the issues
The industry is in a financial logjam as airlines (and to a lesser extent, hotels,) refuse to pay refunds for flights that have been cancelled due to the pandemic. These flights are the flight component of a “package” or a flight-only booked by customer or agent or operator. This has resulted in tour operators and travel agents refusing or not being able to refund the customer because the refund usually from the airline or maybe the hotel has not been passed back to those who sold the product.
See my video interview which explains in more detail.
Abta as the UK primary travel association voice stepped forward to navigate its members through this problem. But ABTA’s role should be put into context.
In 1984 I was elected to ABTA’s Travel Agents Council (TAC), which held half the votes of the Association and had a 50% representation on the main ABTA board. The TAC was the heartbeat of ABTA as it’s travel agent members interfaced directly with customers and at that time a tour operator didn’t dare to sell other than through an Abta agent or “go direct”. Over the years Tour Operator Council (TOC) members set up their own travel shops and eventually their extra votes across both categories of TAC and TOC enabled tour operators to dominate Abta.
At my first TAC meeting I suggested ABTA should develop a payment scheme for the holiday industry, akin to BSP (Billing and Settlement Plan for IATA payments). It eventually should sit as the core function and strength of ABTA. It would control the financial relationship between agent and principal and between big and small and help to protect customer money. After leaving the industry in1987 I returned to the TAC board in 1994. By then ABTA had implemented SPS (Single Payment Scheme) but had decided to make it a non-mandatory operator collection scheme. It was better than nothing, just.
In October 2006 customer financial protection was withdrawn by Abta but its impact on customers was, for obvious reasons, not highlighted. Most agent members, apart from those who followed the politics, didn’t realise the customer financial protection had all but disappeared. Bonding remained to protect operators pipeline monies if the agent went bust.
In July 2008 The Federation of Tour Operators amalgamated with Abta and the Association had come full circle, from being a travel agents association served by operators, it had become a tour operators association served by travel agents. Representation on the ABTA board became less democratic leading to some members having a disproportionate amount of influence.
The industry last year was was hit by a typhoon, when Thomas Cook went bust. ABTA’s reaction was to defend the demise of its second largest member by blaming its bankers for charging too much interest on its massive debts. It’s accounts told a story of a delusional company not addressing its precarious financial position. Perhaps a more rigorous Abta regime may have prevented many of Cooks fellow Abta tour operator members, selling through Cooks, being virtually wiped out by Cooks’ not passing on balances. Abta bonding would normally protect these operators if they did not receive balances. But money was only protected if tour operators did not give credit terms to the agent, most did yet these operators still legally had to provide the holiday.
At the beginning of 2020 the “elephant in the departure lounge” was how many operators had suffered financially at the hands of Cooks. Perhaps ABTA could have done more to police Cooks and protect fellow members?
Abta is still resolute in avoiding clarity of its financial promise, words such as “Protection” “Support” “Confidence” is still common currency on its website and its Code of Conduct is now promoted as the reason the public should book with an Abta member. It insists the strict policing of that Code will secure the standards of business behaviour of its members, financially, contractually and ethically.
Airline finance is at the core of the present problem as airlines have been virtually unanimous in refusing to pay refunds. Initially a cancellation issue transformed into a cash crunch as airlines stopped flying.
See my article “Don’t spend money you don’t have”
These refunds have affected not only flight-only but flights that formed part of a package, sold by an Atol holder. Atol holders that haven’t received cancellation refunds from airlines haven’t got the money to comply with Package Travel Regulations that oblige them to refund the customer within fourteen days.
ABTA’s support of Thomas Cook reflected just of how far it had moved from being an Association that valued all its members. It’s previous structure reflected the travel industry as a broad church. Agents had the customers interest at heart and kept an eye on the excesses of operators and in turn operators both big and small provided the risk, scale and product for all.
Present day Abta is a totally different animal. It’s board is made up of its CEO and two political/public sector members! Native UK companies are represented by two operators whose full accounts are unpublished as they come within the definition of “small companies” and an agency with commissions of less than £7m. This gives an approximate transaction value for native UK board members of less than £100m.
The remaining five members on the Abta board represent companies with their financial decision-making outside the UK, two in Germany and one each in Australia, the US and Dubai. Collectively they have UK sales of just under £9Bn and worldwide sales of approximately £35Bn. Travel agents are now represented by an Australian chain of agencies plus Midcounties Co-op. In effect This makes Abta unrepresentative of the vast majority of its members and therefore unaccountable.
ABTA was in a pandemic predicament. Should it campaign against those airlines who refused to refund? It could have organised its members and along with a public outcry put pressure on the Government to pressure the airlines. Threat of expulsion from ABTA would force members to toe the line and would have shown solidity with the public, refunds might not have been available immediately but it would have highlighted the real culprits and put the industry on the right side of the issue.
But that strategy was at odds with the needs of the majority of global players on the ABTA board. By far it’s biggest member TUI has its own airline and its own hotels and has little excuse that others are withholding money. Initially it refunded but later changed its policy as the scale of the problem unfolded.
Other global players had bigger problems outside the UK and some operators who had already suffered at the hands of Cooks were financially wounded.
So Abta came up with a solution, to offer refund vouchers that would promise a refund in the future, this served to blow the whistle on the fact that the whole industry was short of cash and it denied customers their legal and contractual rights to a refund. But it also set an example that any operator could refuse to refund and not be reprimanded by Abta. Fortunately for Abta members the legal system was also on lockdown and it saved the industry from being swept away by a public tsunami of claims. A tsunami that reflects the pent up anger of frustrated customers and the fundamental misguided decision of Abta.
These vouchers threw its agent members under the bus, being the first port of call for irate customers yet being blameless in not providing refunds.
Agents and some operators had been on the frontline, first repatriating customers and then rebooking those customers for later dates. But for those agents whose customers urgently demanded a refund, chasing non-existent refunds now replaced by worthless vouchers just increased the wrath of customers. Lacking self-awareness Abta insisted that they would bring to book any Abta member that breached their new refund rules, but these rules are open to interpretation and refunds dates are now a moveable feast and anarchy reigns.
I’m not attacking any individuals, Most are good people and know the right thing to do but they have been placed in an invidious position by the incompetence and precarious financials of the airlines and global players. Abta has expertise and an excellent team but it serves and is influenced by global players, whom represent a small proportion of its members, albeit with large sales. These global players have now become part of the problem, not the solution. UK owned agencies and operators have been disenfranchised. Abta has sacrificed the many for the very few. It’s reputation and that of it’s members is now in tatters just to accommodate its main influencers. Abta needs to reorganise to become more representative of the industry.
Some Abta members such as Kuoni (UK), have refunded customers indicating that ABTA’s voucher scheme was not unanimous. , Kane Pirie of Vivid Travel refunded his customers and heads a campaign to refund the customer albeit with a grace period to refund, but it doesn’t add anything to customers existing rights.
The industry should now look to find another voice, a voice that is not self serving and is closer to the customer. A voice that embraces the change in how customer money is used and a voice that is courageous and willing to criticise without fear or favour. It needs to be more democratic and to reflect the heart beat of the industry rather than the voice of the global players. The UK travel industry must be committed to change as this must never happen again. Get involved in your own destiny.
In the words of Stephen Covey:
“Without involvement, there is no commitment. Mark it down, asterisk it, circle it, underline it. No involvement, no commitment.”
*All sales figures are approximate and indicative based on the most recent filed accounts available.