No-frills giant slams £1 passenger protection levy plans

Easyjet has attacked plans to introduce a £1 passenger levy to create a single passenger protection scheme.

The no-frills carrier hit out at the Civil Aviation Authority proposals to create a £250 million fund for tour operator and airline passengers against company failure, as reported yesterday by TravelMole.

EasyJet argues that a £1 levy would represent a 2.3% addition to easyJet’s average fare compared to 0.5% of the average British Airways fare.

The CAA outlined is plans to modernise the “inefficient and expensive” ATOL protection system in a document yesterday. The proposals have gained support from ABTA, the Federation of Tour Operators, the Association of Independent Tour Operators, Air Transport Users’ Council, Consumers’ Association and the Trading Standards Institute.

Seven airlines in the UK out of 19 in Europe have failed in the last five years, the latest being EUjet.

CAA chairman Sir Roy McNulty said: “We believe there is strong evidence that extending protection to all air travellers, funded by a levy, is the simplest and economically the most attractive option.

“It would replace the current complex protection arrangements for the public and create a system that it easily understood and also brings important deregulatory benefits for the travel industry.”

He added that most travel insurance polices do not cover airline failure and those that do would not help stranded passengers get home.

Urging the government to act promptly on the proposals, Sir Roy added: “The instability in the world airlines market, the recent failure of the no-frills carrier EUjet, and the misplaced public belief that they are protected all serve to highlight the urgent need for a more comprehensive scheme to be introduced.”

The CAA proposals are expected to be discussed as part of the next reading of the Aviation Bill in Parliament on October 10 or 11.

But, condemning the CAA’s plans to make scheduled airlines “pay for the failings of tour operators”, easyJet said: “Penalising airlines and their passengers by imposing a blanket levy regardless of the fare paid or the financial viability of the carrier flown is a highly burdensome and costly approach to the financial protection of air travellers.”

Instead the government should opt for alternatives that provide a “win-win” situation for consumers, airlines and the government together.

The alternatives suggested by easyJet are to:

*Impose an information requirement on all airlines to leave passengers in no doubt as to what level of cover applies.

*Draw up an industry code of practice for the repatriation of stranded passengers along the lines of easyJet’s rescue package for EUJet passengers in July.

*Give more powers to CAA to improve its financial monitoring capability and therefore its ability to manage foreseeable failures.

*Leave airlines to offer the cover best suited to their business through the commercial products already on offer to them in the insurance marketplace.

EasyJet communications director Toby Nicol said: “We agree that consumers should be protected against the financial failure of airlines – but we disagree violently with the solution proposed by the CAA.

“Flat-rate charges discriminate against those airlines offering the lowest fares and mean that short-haul passengers would be cross-subsidising the cost of repatriating long-haul passengers.

“I don’t see how this is to the benefit of easyJet customers and remain convinced that the CAA’s only real incentive to get scheduled airlines into its scheme is in order for our passengers to fund it.”

Report by Phil Davies