Payouts to passengers of the failed XL Leisure Group threaten to exhaust the funds underpinning consumer financial protection.
The Civil Aviation Authority refuses to estimate the total cost of the XL Leisure Group failure, but in a sign of the pressure on funds it has rejected up to 4,000 claims from consumers who paid in part by credit card – despite paying such claims in the past.
A CAA spokesman said the scale of the collapse led to the change in policy, which is in line with consumer protection law, but conceded: “We have previously accepted claims where there was part credit card payment.”
About 45,000 claims have been received so far, but the CAA has no idea how many have still to be submitted.
Refunds will be paid from the £42 million bond provided by XL and thereafter by the Air Travel Trust fund using a £60 million overdraft guaranteed by the government.
The fund was £21 million overdrawn on April 1 last year – leaving about £81 million available to cover the bill for refunds and repatriation before insurance facilities kick in. Even a bill of £60 million would mean pressure to raise the £1 ATOL Protection Contribution on holidays now paid into the Air Travel Trust fund.
It is understood repatriation of customers abroad when XL collapsed did not exhaust the £42 million bond and the CAA confirmed this week it has paid £9 million in refunds so far. But it would not say how many claims have been settled.
One industry source described a bill of £80 million as “possible”.
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