While the controversy continues to mount over the growing problem of outstanding refunds to travellers that have paid monies over to airlines and tour operators who have subsequently had their flights and/or holidays cancelled, one particular point seems to have been missed by the media and many others.
Let us take flights to Barbados as an example.
Even the lowest priced economy return fare, per man, woman or child, includes a minimum US$100 in APD (Advanced Passenger Duty), 17.5% VAT on the Barbados/UK portion, not one, but two departure taxes amounting to US$97.50 plus any additional taxes and levies imposed by the UK.
Travel by business class and the APD climbs to around US$220 and First Class US$660, while still attracting the same rate, but significantly higher amount of VAT. In the United Kingdom the airlines are legally bound to refund the flights they have cancelled, within 7 days.
But instead several have chosen to delay compensation or attempt to avoid liability, despite that a substantial proportion of the monies already collected and paid for in the ticket cost does not belong to them, having simply collected it on behalf of the respective Governments.
Simply put, in many cases the airlines are at least partially subsidizing their current existence with other people’s money, whether that cash is the property of the passenger or applicable Government. And until the refunds are paid in full the airline is benefiting from interest-free usage.
While they continue to flout the law so blatantly, the danger also grows that those travellers, who were initially happy to pay up front, and trust their funds to the airline, tour operator or travel agent, will be extremely sceptical to do so again on any future booking.
In my humble opinion, they have done a lot greater harm to themselves by avoiding timely refunds, than they can possibly imagine. As if it is not already sufficiently frustrating for the holiday maker, the lifeblood of the travel industry, certain banks are further complicating the situation.
Under a headline newspaper banner ‘Banks have blocked GB Pounds 7 billion in holiday refunds’
Unable to seek recompense through the airline or operator, thousands of travellers have turned to their bank and card issuer, who are again legally obliged to refund customers under Section 75 of the Consumer Credit Act. Customers who booked their holidays or flights on a credit card can claim back the cost from their bank provided that the cancellation amounts to a breach of contract.
However, some banks also appear to be unfairly preventing their credit card customers from making ‘chargeback claims’.
Visa and MasterCard holders, under their terms of service can ask the bank to initiate a chargeback dispute, if the company does not provide the service that has been paid for.
The banks practicing these delaying or avoidance tactics are clearly in contravention of their agreements with Visa and MasterCard.
Both the UK Government and the various bodies responsible for the regulation on interaction between the banks and their customers, including the Financial Ombudsman Service, are presently investigating, what some may consider, this alleged malpractice.