A local reader finds the ATOL scheme refuses to pay out for lost flights following the collapse of Aegean Airlines / Holidays 4 U when they went bust back in August.

The collapse of Aegean Airlines / Holidays 4 U on 3rd August this year highlighted yet again the precarious financial nature of some travel operators. But with the ATOL protection scheme in place for certain bookings customers have a financial safety net in place for just such events.

All tour operators selling flights and air holiday packages must hold a licence from the Civil Aviation Authority (CAA). If a Licence holder fails, the CAA is responsible for ensuring customers are either repatriated to the UK or receive a refund of payments made.

Repatriation costs and refunds are met by the Air Travel Trust Fund, the funds of which come from a £2.50 per person contribution, called the ATOL Protection Contribution (APC), each licence holder is required to make when it accepts a booking under its ATOL.

The ATOL scheme has been around since 1970. Currently it protects those buying flight inclusive package holidays and certain flights against insolvency of their tour operator.

In 2010 over 190,000 consumers were directly affected by ATOL holder insolvencies and those abroad when the insolvency occurred benefited from the repatriation arrangements provided by the CAA and the remainder, who had made bookings but not yet travelled, are entitled to a refund for their losses.

Peter Tilsley of Ovacik lost flights in the Aegean collapse but ATOL cover does not extend to him.

Peter explains:

“We booked and paid for flights in July 2010 for our trip to UK during September with Aegean Flights. When the news came that that the company were in liquidation we submitted our ATOL claim via the CAA which was received by them on 11th August.

Last week we received a letter from the CAA stating:

<<The purpose of the ATOL system is to protect flights and air holidays that depart from the UK and, exceptionally, overseas originating flights where the customer booked in the UK>>

As we had booked online in Turkey for flights from Turkey to Bristol, UK and back they said:

<<we are unable to offer you a refund under the ATOL scheme.>>”

Peter was devastated by the news having thought, as we are sure many do, that the scheme would cover any flights or packages bought through the bonded company. But the CAA is adamant that the ATOL scheme will not pay out.

Peter subsequently rearranged his flights but at more than double the price than had originally been paid for the Aegean flights.

So how can you protect your purchases when buying flights when not in the UK?

There are two ways.

Travel Insurance

Firstly, buy a travel insurance policy that covers airline or travel company failure but make sure the small print does not exclude tickets purchased outside the UK. Remember insurance purchased in the UK will require you live in the UK to validate cover normally so this may only be an option for those travellers that buy one way tickets and purchase a separate return when in Turkey.

Pay by Credit Card

Or, pay by a UK registered credit card. Section 75 of the Consumer Credit Act 1974 covers those who used a credit card to buy tickets as long as they are over £100 in value, even if you purchased abroad. (In 2006 the Court of Appeal confirmed this applies to everything you buy whether it’s in the UK, abroad or on a foreign website).

The best thing is the cover is free too. Well by free we mean the credit card company does not make a charge even if the airline does make a higher charge for the use of a credit card.

Beware though as there are restrictions to the cover and these are:

1. The primary cardholder, where two cards are on the same account, should be used to make the purchase;

2. You must book directly with the company. Using a third party may mean a claim would be refused. By third party we mean using a credit card to pay via Paypal for tickets would probably fail the section 75 test. Likewise booking through travel agents could also be refused as they are not the main party.

3. The value of the tickets must be in excess of £100.

So for those booking outside the UK where ATOL will not provide cover the extra fee you pay to use the credit card to book your flights could be just the cover you need in the event of an airline going bust.

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