The protection available to holidaymakers needs clarifying

Continental holidays are still very popular, despite the difficult economic times. The essence of a package holiday is an arrangement covering transport and accommodation booked in advance at an inclusive price (Keppel-Palmer v Exsus Travel Ltd [2003] EWHC 3529 QB; R (ABTA) v CCA [2006] EWCA Civ 1356). Unfortunately over the years there have been some serious failures and collapses by companies in the travel and holiday business; for example, Clarkson 1974, Laker's 1982, International Leisure Group 1991, XL 2008. Recession increases the risk.

The statutory protection for the package holidaymaker has improved considerably. On the European Union EU level there is the Directive on Package Travel 1990, 90/314/EEC (which covers air travel, coach and ferry). For the UK, deriving from the UK directive, there are the Package Travel, Package Holiday and Package Tours Regulations 1992 SI 3288. Money paid under the contract is held in trust until performance (regulation 20). The Department of Business, Innovation and Skills has issued guidance.

Under the Civil Aviation Act 1971, the Civil Aviation Authority CAA in conjunction with the industry set up the Air Travel Organisers Licence ATOL scheme, a financial protection scheme for holidaymakers. Under the Air Travel Reserve Fund Act 1975 there is the Air Travel Trust, a fund, including bonds, to guarantee any shortfall in the ATOL scheme. The Air Travel Insolvency Protection Advisory Committee (ATIPAC) advises.

Naturally the consumer should seek to deal with a reputable company; for example, one belonging either to the British Travel Agents Association ABTA or the Association of Independent Tour Operators AITO.

Although the overall protection for the package holidaymaker is therefore legally sound, the problem that has arisen is that the consumer pays in advance to the holiday company, but the holiday company often does not pay the hotel until after the holiday, i.e. in the autumn and early winter. If the company goes bust in the summer, and has not observed the trust requirement, the hotel demands payment in cash from the holidaymaker for the stay, or continued stay, and the stand-in airline, whichever airline is able and willing to carry the holidaymaker home, demands cash for the flight home.

The consumer will worry that they may have in effect to pay twice for the hotel and the flight; though in fact under the protection scheme they will eventually be able to recover the additional money, albeit after some administrative hassle. The amount recovered may, however, end up by being less than actually paid out. Also, the consumer may not have cash or other monies readily available, and may end up stranded, dependent upon the goodwill and assistance of others.

NCF has for many years campaigned for the principle of the trust fund, namely that, where the consumer pays in advance for goods and services, money should be set aside in a trust fund to be paid over, as the consumer intended, only to the airline and hotel, and not be available for general use by the company. If the company was to go bust during the summer the money for the airline and hotel would be available, and all parties would be secure. The hotels and airlines would not need to seek the additional payments from the consumers.