Industry warned not to ignore delay compensation claims

One of the biggest threats facing the travel industry over the next 12 months is the volume of compensation claims it will receive for cancelled and delayed flights.

Deloitte’s global leader for travel and aviation Graham Pickett warned delegates at the Travel Matters conference that firms can’t afford to ignore the risk.

Comparing claims under EU261 passenger compensation rules to the mis-sold PPI claims, which have so far cost the banks more than £16 billion, Pickett said they could ‘upset a very successful year coming up’.

"This is going to bite us, unless we address it," he said. "It is no good the industry sticking its head in the sand, ignoring claims just because someone hasn’t filled in the form correctly."

He warned that the Government is more likely to side with the consumer, so companies should avoid falling into the same trap as the banks, which initially rejected many claims only to be forced later to compensate customers.

Pickett described PPI claims as ‘a huge burden on the overhead of these corporations’.

He said that, on the whole, the outlook for the travel industry was more optimistic than a year ago, following a rapid rise in household spending and a generally positive attitude to holidays as people look to see where to spend their money.

However, he said the industry faced several other risks including interest rate rises here or in the US, especially as household debt has risen to £53,000 per person, too much airline capacity, oil price uncertainty – though no major changes are expected,  the danger of Greece exiting the euro – although he said this was unlikely – and the EU in/out referendum to take place next year.

Pickett said remaining in the EU was a ‘no-brainer’ for business, but ABTA chief executive Mark Tanzer told the conference that the association has yet to decide its stance on the matter.

"We are still in some fairly choppy waters and the EU referendum could upset the apple cart," said Tanzer.  "We need to work up a position, but my prejudice at the moment is that we are better in than out."

Monarch Group chief executive Andrew Swaffield said exiting the EU would be potentially damaging to his business, which is heavily exposed to the holiday homes market.

"Many second home owners travel to their holiday homes [in Europe] several times a year, as if they were driving to Devon or Cornwall, but if we were to leave the EU that market would suffer significantly," he said.

"We are very exposed to that market. I hope we stay in Europe, but I would like to see a reformed EU."

With regard to the potential for Greek exiting the euro if it is unable to meet next week’s deadline for a £1.6bn loan repayment, Swaffield said the situation could be ‘easily managed’ as long as tour operators don’t over-react.

"If we all decide to move capacity out of Greece and put it elsewhere, say into Spain, we will create a crisis of much bigger magnitude.

"There will then be far too much capacity in Spain, prices will collapse, so we’ll have to move capacity elsewhere.

"If we don’t overact, the Greek situation could be easily managed."

However, Swaffield admitted that was an optimistic view. "There is a history of airlines overacting and pulling out," he said.