The DfT’s announcement was welcome news but subtleties are crucial, argues VIVID Travel owner and Right to Refund founder Kane Pirie

The long-running saga around Refund Credit Notes finally reached a conclusion with a Department for Transport announcement on July 18. The welcome news for holders of RCNs is these will now be Atol-protected, within defined parameters. There are subtleties to the announcement which are worth unpicking from the froth.

First, be under no illusions that Refund Credit Notes were Atol protected prior to this announcement. They were not. The Department for Transport is not confirming that Atol protection has been in place, rather it is retrospectively putting Atol protection into effect. The distinction is key and underlines the multi-billion pounds risk the consumer has been carrying for months.

The announcement, therefore, justifies the concern of the Right To Refund campaign, Which? and others in flagging concerns about the uncertainty of financial protection.

Second, the mystery as to why the Civil Aviation Authority remained mute and refused to confirm Atol protection is solved. Refund Credit Notes were not Atol-protected so they could not provide that reassurance, until of course, they were.

Third, this is no government bailout. There is no money behind the announcement. If the Atol scheme piggy bank runs overdrawn then it will simply be clawed back over time from the Atol holders through ongoing Atol payment contributions (APC) paid per passenger on every booking.

Fourth, there is important detail as to what is and what is not covered. Refund Credit Notes will be only be covered to the value of the original Atol booking (or amount customer paid towards if lower) so any incentive offered to the customer to accept the Refund Credit Note, for example a 10% uplift, will not be Atol-protected.

Fifth, the announcement can also be read as confirming that Refund Credit Notes are in essence vouchers and therefore not Atol-protected, in general, but due to Covid-19 a special class of voucher has been created which will have Atol cover, albeit time limited. To qualify as a “Covid-19 Voucher”, defined in detail in the Air Travel Trust Payment Policy, all three of the following must apply:

  • Atol-protected booking cancelled by Atol holder due to Covid-19;
  • Refund Credit Note issued between March 10, 2020 and September 30 2020; and
  • Atol holder fails on / before September 30, 2021.

The results of this announcement are therefore contradictory. It is excellent news that the massive volume of Refund Credit Notes already issued are now Atol-protected. But it is also significant that the government has confirmed that outside of this defined exception, Refund Credit Notes are not Atol-protected any more than any other voucher.

This contrasts starkly to Abta’s long-held assessment and will be important for consumers to understand if Atol holders continue to offer them after September 30, 2020. Those Refund Credit Notes will not be Atol-protected.

Sixth, now the CAA are free to speak out it is also noteworthy that they repeat several times in their document (also published on July 18) that customers should be offered a refund (money) within 14 days of cancellation; that has not changed and any Refund Credit Notes should only be offered as a second option for customers alongside a proper refund.

In conclusion, the government has at last backed the scheme that has been running since March, which is a relief, but is simultaneously calling time on it.

Customers are unlikely to accept Refund Credit Notes from October 1, 2020 given they will not have Atol protection. This should mean after a six-month rollercoaster ride for the industry, things settle down from then on, at least in terms of all players working to the same set of rules and customers being refunded promptly within 14 days.

Let us hope so. The process of rebuilding trust will take many years and the sooner we regroup as an industry and start work on that the better.