Fly Zoom collapse: Watchdogs demand mandatory compensation for air passengers

Published on Friday 29 August 2008 21:40

AIR travel watchdogs have called on the government to introduce a compulsory compensation scheme for all airline passengers following the collapse of the low-fare carrier Zoom.

Hundreds of people remain stranded on either side of the Atlantic yesterday after the firm grounded all its flights at short notice and entered administration, with some travellers paying thousands of pounds for alternative flights or cancelling their holidays altogether.

The Civil Aviation Authority (CAA) warned that only those passengers who booked flights as part of package deals are guaranteed flights home at no further expense.

With tens of thousands of customers expected to end up out of pocket, the Association of British Travel Agents (Abta) and the Air Transport Users Council (ATUC) are pressing for the introduction of a 1 levy on all air passengers leaving the UK towards a compensation fund.

Zoom, founded by Scottish millionaire brothers John and Hugh Boyle, went under owing millions of pounds in fuel costs, leasing charges, airport fees and for other supplies. It is the 11th airline to go to the wall this year.

The company said about 80 per cent of its passengers with outstanding bookings were likely to be able to get refunds, and that about 4,500 UK-based customers had made reservations for travel within the next week.

About 650 had been due to travel home from North America and Canada over the weekend.

An estimated 40,000 passengers, including about 10,400 Britons, had made bookings with Zoom over the coming year.

Hugh Boyle, Zoom's chairman, said: "We are trying to make as many passengers as possible aware of their options in terms of alternative flights and the possibility of securing refunds for the flights they booked."

Other airlines, including BA, Virgin and FlyGlobespan, were helping passengers with alternative flights yesterday, but there were complaints of high ticket prices.

Ramsay Smith, a spokesman for Zoom, said that the company was in advanced negotiations for new investment and a refinancing package.

Abta said yesterday that compensation schemes should be mandatory for all air passengers. Mark Tanzer, its chief executive, said: "This failure in a tough economic climate, along with numerous other airline failures this year, highlights the importance of having financial protection in place when you book flights."

The notion of a 1 levy was first mooted by the CAA three years ago, but rejected by the government on the grounds that it did not want to force people to pay for insurance.

"The airlines thought it would add another unnecessary cost, but it would be a useful levy, and should be rolled out to all pre-arranged air travel," an Abta spokeswoman said.

James Fremantle, industry affairs manager for ATUC, the consumer watchdog for the industry, said: "We have been pushing the government for a long time to introduce a compensation scheme for all passengers of scheduled airlines across the board."

Many passengers who took out travel insurance may find they are not covered for "scheduled airline failure insurance". Only two months ago, the insurance firm International Passenger Protection added Zoom to the list of firms it would not cover should the airline go bust.

Zoom employed 450 staff in Canada and 260 in the UK, who will all lose their jobs unless a new investor is found.

Q & A

Will passengers who have paid for tickets for Zoom flights get their money back?

Not all of them. The fortunate are those who booked their flight as part of a package holiday. They are almost certain to be covered by the Civil Aviation Authority's (CAA) Air Travel Organisers' Licensing (ATOL) system, which sees companies lodge a financial guarantee bond with the CAA which can be used to bring stranded clients home and compensate customers.

What about people who have paid for their Zoom tickets by credit or debit card?

If the tickets were bought with a credit card, and the transaction exceeded 100, your money is protected under the terms of the Consumer Credit Act. The protection does not apply to debit cards.

What about those who have paid cash for a flight-only deal with Zoom?

They will not receive compensation.

Are passengers with travel insurance covered?

Most travel insurance will not include what is called "scheduled airline failure insurance", which applies to carriers that fail to fly. This loophole is often found in the small print on policies.

Is it likely other airlines will fold?

Yes, says ABTA. Smaller carriers like Zoom are the most prone. It is the 11th airline to cease trading this year.