29 August 2008

Zoom and the financial pressures on the travel industry

TravelMole guest Comment by Paul Mclean - director, International Passenger Protection Ltd

Sadly, Zoom is the 24th airline in the eight months of 2008 to close operations as a result of the exceptionally difficult trading conditions that have plagued the airline world for the last year.

Both British Airways and Virgin Atlantic have indicated that they will be offering special fares to customers whose travel plans have been affected by Zoom's suspension of flights.

There is usually some form of protection provided by credit cards but claiming is a long-winded process and can take months and may not cover those people stuck abroad.

Any passengers that booked an inclusive package with an ATOL agent should refer to the CAA for a refund or repatriation.

The demise of Zoom highlights once more the need to either protect tickets sold by agents or offer an insurance policy to customers.

Under the unfair commercial practices directive which came into force on May 26 agents could be held responsible for not pointing out to customers if there is no financial protection in place for any part of their holiday.

Unfortunately the fact remains that the public will always believe that everything is covered and if the agent has booked their ticket on a failed airline they will be expected to refund them or face losing a client.

The benefit of insurance is that the agency can cover all their air tickets and have peace of mind knowing they can re-book a customer before their departure or if they are stuck abroad and the insurance does not have to cost the agency anything if they pass it on.

The huge number of airline collapses is causing great financial strain to the travel industry with an increasing number of agents finding it a financial problem to meet such losses.

We have this morning started receiving a large surge in calls from the lucky agents who have insurance wishing to claim for their clients so they can be re-booked or repatriated immediately.

Any customer who booked with an ABTA travel agent would have been offered cover for such circumstances through either their online ABTA Protection Plan or their ABTASure Travel Insurance.

The airline industry is now reacting to the negative image reflected to the public on airline insolvency, and many airlines such as British Airways, Ryanair Air, EasyJet and Flybe for sometime have provided protection on their travel insurance policies.

We as a company are already in talks with two large carriers who are looking to provide protection on every ticket to show to the public the difference between booking with them and other airlines.

Unfortunately the future remains very uncertain for airlines; this is the worst time in aviation history with the constant vicious circle effects of the oil and credit crises.

As oil remains well above the cost of oil hedged by the worlds airlines last year, they are slowly but surely running out of money and when such business models relying heavily on investment it is sadly the credit crunch which strangles them as they can no longer get the investment they need as the world banks are already in problems of their own.

There will be many other airlines to go.

ItÃ¢â¬â¢s a shame to see so many revolutionary airline models fail already this year, but the fact is only the strongest will survive.

As we are all seeing, even the strongest are now making losses, how much longer can they last?

The key is, sadly, increased ticket costs, and for agents, insurance protection for them and their clients.

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Your Comments (2)

Blame everyone but yourself

How sad Jonathan Hinkles has to blame everyone but himself for the failure of Zoom. IPP had received a number of requests including charter quotes and this resulted in a review of the airline's accounts and a letter was sent to Jonathan Hinkles on the 9th June clearly explaining that. We found all the marks of an airline in difficulty together with the aggressive nature of Jonathan Hinkles and the failure to provide management accounts or a draft set of accounts for April 2008 were refused. Anyone refusing to give such information to us clearly is a signal that the airline is in difficultly. This proved to be true. If we knew in June then it's inconceivable Mr Hinkles did not know, but despite that he continued to take the public's money. What will not be overlooked or forgotten by the travel industry is Mr Hinkles of Zoom.

By Paul Mclean, Monday, September 1, 2008
It's time for some straight talking about IPP

I am quite amazed to see that IPP is using the collapse of Zoom to further its own aims. In my opinion, IPP's actions in withdrawing scheduled airline failure insurance back in early June directly contributed to the failure of Zoom last week. Other travel insurers and a large number of friends and colleagues throughout the industry have told me that they are appalled by the way in which IPP has acted, and I guess that this piece of blatant propaganda issued by IPP in the wake of last week's sad events will do nothing to enhance its reputation in the eyes of those individuals. As a concept, I believe that scheduled airline failure insurance is a good thing. However, I would urge any agent or passenger seeking to effect this type of cover to widely consider their options for insurance providers. The fact that - in my opinion as a Director - IPP has played such an integral part in the failure of Zoom should not be overlooked or forgotten by the travel industry. Jonathan Hinkles Former Managing Director Zoom Airlines Ltd

By Jonathan Hinkles, Monday, September 1, 2008