Australia’s Flight Centre Limited has called for uniform financial protection for air travellers in the wake of a string of international airlines collapses.managing director Graham Turner said while the major international airlines had performed strongly during 2007/08 the recent demise of a number of smaller overseas operators highlighted the potential dangers airline collapse posed to the travelling public.
Mr Turner said the collapse of any major carrier servicing Australia would also highlight the current inconsistency in consumer protection regulations in the country, as airline customers would not be protected by the government-controlled Travel Compensation Fund (TCF).
“Regulators in Australia currently demand that Flight Centre Limited and other travel agencies pay annual fees to the TCF to protect consumers from financial loss flowing from a travel agency’s collapse,” Mr Turner said.
“All travel agents must contribute to this fund, regardless of their financial strength.
“Airlines, however, are exempt from contributing to the TCF, despite the significantly greater financial impacts associated with airline collapse.
“Thousands of Australians experienced these harsh financial impacts first hand following the demise of Ansett in 2001 and Air Paradise in 2005.
“Had airlines been required to play by the same government rules as travel agents, the effects of these airlines’ collapse would not have been as severe for the travelling public.
“If government regulators are serious about genuinely protecting travellers via the TCF, it is reasonable and logical that airlines flying to and from Australia contribute.
“Without airline participation, travellers are not protected from the greatest potential threat - losses stemming from a carrier’s collapse - and travel agents are left to foot an inequitable burden in terms of financial costs and administrative red tape.”
According to its 2007 annual report, the TCF paid $4million in compensation to 5285 consumers affected by travel agency collapse during the year.
By contrast, Ansett had nearly three million creditors at the time of its collapse.
Flight Centre alone had almost 1900 customers who were adversely affected by Air Paradise’s collapse.
“These two incidents clearly illustrate the financial effects airline collapse can have on the travelling public,” Mr Turner said.
“Internationally, there have been many more examples recently. Thankfully, these have largely been secondary carriers with minimal impact on Australian travellers.
“While the major Australian carriers all have solid financial foundations currently, thousands of travellers would be left counting the costs in the event of a future collapse or the demise of a major international carrier servicing Australia.
“If travel retailers have to be subject to the costly red tape of licensing and industry-wide compensation contributions then surely airlines should also.”
Airlines that have recently ceased operations or sought financial protection include ATA (US), Skybus (US), Oasis (Hong Kong), Frontier (US), Champion Air (US), Aloha (US), Maxjet (US), Nationwide Airlines (South Africa) and O’Connor (Australia).