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Credit card and insurance friction follows latest collapse

July 27, 2015 Corporate, Headline News 2 Comments Email Email

egtmedia59Consumer losses continue to blow out after the collapse of Sky Air Services in Fremantle, with more than 100 consumers now reporting losses totalling about AUD 340,000 and the final tally expected to soar higher still.

Fallout from the collapse, involving statements about credit cards and insurance, is also causing friction – and negative media publicity is spreading.

Western Australia’s Consumer Protection bureau reported at the weekend that most of Sky Air Services’ out-of-pocket clients had yet to travel, but an unlucky 13 were stranded, “currently in Europe with no confirmed return flight”.

Agents, meanwhile, have criticised Western Australia’s consumer affairs chief for advising consumers to protect themselves by always using credit cards to pay agents rather than direct bank transfers.

In a statement after the collapse of Sky Air Services, WA Commissioner for Consumer Protection, Anne Driscoll, said:

“Consumers who have made a booking using a credit card and not received what they paid for should seek a chargeback from their card provider. Unfortunately those who have paid by direct bank transfer may not be able to access redress in this way, which serves as a reminder not to pay for travel services in this way. People in this situation should still speak with their bank about what options they may have. 

“It is also worth checking your travel insurance policy and speaking with your insurance provider to see whether you are covered in this particular situation.” 

(For her full statement see our earlier story: Clients stranded and abused as another agent goes down)

Agents have slammed Driscoll’s statement, pointing out that the travel industry’s thin profit margins, coupled with high credit card merchant fees, leave direct transfers as one of the few ways by which honest agencies can reduce their overheads.

Driscoll, however, is not the first to have advocated using credit cards to pay agents.  A report in Melbourne’s Herald Sun on 14 May 2015 about an earlier agency collapse (CTS Travel Services) includes the following sentence: “Australian Federation of Travel Agents executive Jayson Westbury advised people to pay for flights and accommodation using credit cards and to make sure their travel insurance included coverage for travel agency insolvency.”

Taking out insurance to cover travel agency insolvency is not easy, as the consumer advocacy group CHOICE pointed out in a report published on 3 June 2015, headlined: ‘Protect your holiday savings when using a travel agent’.

“As it stands, there is no travel insurance policy that covers the collapse of a travel agent,” CHOICE stated bluntly.

“Less than a third of the insurers in the most recent travel insurance review provide limited cover for the insolvency of a travel services provider such as an airline, hotel, bus, or car rental agency.

“And two travel insurers, Aussietravelcover and CHI Travel Insurance provide cover if a specified list of travel wholesalers or tour operators, such as Qantas Travel and Scenic Tours, go bust but none cover the collapse of a travel agent.”

CHOICE noted that some travel agents had taken steps to protect themselves and the consumer.

“Ask your travel agent what kind of protections they have in place to protect you from their insolvency,” CHOICE advised. Obviously, this works only if an honest answer is given.

Now that the Travel Compensation Fund (TCF) is no longer around to redress client losses, bad publicity flowing from agency collapses is proving pervasive and damaging.

Not everyone realises the extent of such publicity.

News of the latest collapse (Sky Air Services in Fremantle) has been reported throughout Australia and globally, by News Corporation, Fairfax, ABC News and Britain’s Daily Mail newspaper, among others. The Daily Mail’s online site, one of the world’s biggest news sites, published the story under the following memorable headline: ‘We can take your 20 dollars and wipe our butts with it’: Travel company’s incredible abusive responses to customers who complained about lousy service

The story is also picking up thousands of hits on Reddit, the online bulletin board, social networking and news website.

Sky Air Services is the fifth known travel agency collapse in Australia since 14 May 2015. The five collapses, many of which have incurred major consumer losses, have been reported in print, online and on TV, notably by a segment of Channel Nine’s ‘A Current Affair’, screened in June and entitled ‘Travel agents from hell – they take your cash, but don’t book your holiday.’

Few people who read or view such stories remember all the fine details. They just retain the impression that consumers, just like themselves, have been ripped off, lost their money and had their holidays ruined – all through visiting a travel agent.

How closely does the public follow travel agent regulation?

Comments posted on a Facebook page called ‘CTS travel liquidated – Altona Meadows’, set up by the victims of that recent travel agency collapse, give a clue.

“When will the Travel compensation fund gets its act together? This seems to be happening all too often now,” reads one comment posted earlier this month.

“That’s the problem – there is no travel compensation fund now,” another post replies.

Written by Peter Needham

Currently there are "2 comments" on this Article:

  1. AgentGerko says:

    How do 13 people get stranded in Europe without a return ticket? They must have departed with a confirmed eticket. One can only assume the airline has refused to honour the return flight, which seems pretty mingy to me. How expensive is it to provide a flight home to someone who believed they were paid for? It’s not their fault the agency went down.

  2. Nicky says:

    Yet another example of the schamozzle created by getting rid of TCF. Fat cats lining their pockets. I’m guessing the members of AFTA are all being well compensated, yet the customer certainly doesn’t appear to be protected by the removal of TCF and loss of mandatory licencing by Travel Agents. Still can’t understand how moving to the new ATAS scheme is supposed to be “cheaper” for Agents to compete in this online world. I’d much rather pay my $500ish dollars a year to continue TCF membership and for my clients to have great confidence in our industry. Disgusting abuse of power. Really no point saying it now, but “I told you so!”

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