Scheduled Airline Failure - A Consumer Success Story

Since Travel Insurance Insider penned the excellent article investigating the next airline to go bust insurers have now woken up to customers' demands.

This time last year, very few insurance companies incorporated a scheduled airline failure clause in to their policies. This was largely a legacy from a time when tour operators ruled the travel market and airlines going bust were both unthinkable and seemingly only a concern for industry bodies such as:

• United States Tour Operators Association (USTOA)
  
  
• European Tour Operators Association (ETOA)
  
  
• Association of British Travel Agents (ABTA)

However, since the advent of low cost carriers and the accessibility of flight only purchases the role of tour operators has dwindled to the extent that even back in 2006 only 55% of all airline tickets were purchased through travel agents. (Source: PhoCusWright’s Travel
Agency Distribution Landscape 2006 - 2009).

Driven by the economising focus of airlines such as Easyjet and Ryanair, consumers revelled at the idea of circumventing travel agents' 12% profit margin and happily endorsed the process of disintermediation.

The idea of consumer ground-swells predicting the next airline to go bust is a recent phenomenon, but thankfully most insurers now offer scheduled airline failure cover. Typically this is sold as standard, and less often as an additional charge.

Turn the clock back a year and we viewed a different set of circumstances: Scheduled airline failure was omitted from many policies, considered a high liability should an airline go bust, generating a large influx of claims in a concentrated period.

It was only when airlines began folding and customers engaged the acid test of their travel insurance policies, that the lack of cover in this area was found to be unnacceptable and thanks to subsequent industry guidelines, scheduled airline failure is now available to the majority of policy holders.


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XL Leisure in Administration

As predicted only recently on Travel Insurance Insider, another big player in the travel industry has gone bust today, soon after Zoom Airlines and before the dust has even settled; XL Leisure Group have followed suit.

“The Civil Aviation Authority is chartering planes from airlines, lease companies and tour companies after Britain's third-largest tour operator entered administration, leaving a further 200,000 people with holiday bookings that are now worthless.”

Source: Guardian.co.uk

Shock Collapse

The XL shock is far worse in scale than the Zoom airlines liquidation, especially that the XL leisure group provide holidays as well as individual flights through their XL Airways. Again the same advice applies; ensure that the holiday company is ATOL protected. (For these customers, assistance may be available by contacting the CAA’s help line telephone number +44 (0) 2891 856 547.)

When booking flights only, as many have done with XL Airways, both online and through their call centres, such an incident will not be covered by the ATOL scheme, so confirm the travel insurance policy wording includes provision for “Scheduled Airline Failure”, as has happened to XL Airways today, as a subsidiary of XL Leisure group. Associated businesses are also affected:

“XL Leisure Group PLC, XL Airways UK Limited, Excel Aviation Limited, Explorer House Limited, Aspire Holidays Limited, Freedom Flights Limited, Freedom Flights (Aviation) Limited, The Really Great Holiday Company PLC, Medlife Hotels Limited, Travel City Flights Limited, Kosmar Villa Holidays PLC – Are all in Administration.”

Source: XL.com

XL Gone Bust

The company blames the escalating fuel prices and general economic downturn, resulting in the business going in to administration. Despite efforts to source a funding recovery package, these attempts failed, and all paid holidays have been expensively cancelled, and all aircraft have been grounded. XL Leisure Group (pronounced: Excel Leisure Group) cannot fund any money back. Not even for those currently on holiday and requiring a return journey back home.

Nationwide, there are stories of plans ruined, holidays scratched, and money lost;

“The Jenkins arrived at Newcastle Airport this morning for their two-week holiday in Skiathos, Greece, to find the flights cancelled.”

Source: Gazettelive.

Travel Insurance Cover

There cannot be a more obvious and pertinent warning that the economy is in a volatile state, and arranging comprehensive travel insurance policy proffers the best way to safeguard holiday plans and protect hard earned finances.

Also note that similar services integrated with financial products notably credit cards and current accounts, are sometimes lacking. It is worthwhile making direct comparisons with standalone products and searching for reduction in cover, and increase in charges.

Related Articles

1. Next Airline to go bust?
   

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