JOINT COMMITTEE ON TRANSPORT debate -
Wednesday, 5 Oct 2005

Tour Operators — Travel Agents: Presentations.

Chairman

We meet today with representatives of the Irish Tour Operators Federation, the Irish Travel Agents Association and the Director of Consumer Affairs to discuss the regulation and licensing of tour operators and travel agents. Background information on Irish tour operators has been circulated. I welcome Mr. Niall McDonnell, acting president of the Irish Tour Operators Federation and acknowledge that the president, Mr. Bill Smith, is unable to attend. I also welcome Mr. Michael Doorley, president of the Irish Travel Agents Association, Ms Carmel Foley, the Director of Consumer Affairs and their colleagues.

I draw the attention of witnesses to the fact that while members of the committee have absolute privilege, this privilege does not apply to witnesses appearing before the committee. Members are reminded of the parliamentary practice according to which they should not comment on, criticise or make charges against any person outside the Houses or an official by name or in such a way as to make him or her identifiable. I propose to begin with a short statement from Mr. McDonnell, with subsequent statements from Mr. Doorley and Ms Foley, followed by a question and answer session. Is that agreed? Agreed.

Mr. Niall McDonnell

I apologise on behalf of Mr. Bill Smith who was unavoidably detained today. I am accompanied by Mr. John Kinane from Sunworld, Mr. Eugene Corcoran from Budget Travel and Mr. Flan Clune, the chief executive of the Irish Tour Operators Federation.

The federation was established in September 2002 as a non-commercial lobby group to represent the interests of tour operators. As a lobby group, we liaise with tourist boards, airports, the Commission for Aviation Regulation, the ITAA, the Office of the Director of Consumer Affairs and governments, domestically and internationally. The members of the federation account for 80% of the Irish package holiday market and provide in excess of 2.5 million customers for Dublin Airport, many of whom are high spending, non-EU destined passengers. I stress that the federation is not a competitor of the ITAA which, as Mr. Doorley will set out, represents the independent retail sector. The federation represents wholesalers and is very happy to work with the ITAA on matters of mutual interest.

All members of the ITOF are fully compliant, experienced professionals who are very focused on customer care at home and overseas. The level of customer care provided by our members over the years has exceeded the standards set out in legislation, which is indicative of our professionalism and commitment to the excellent observation of a duty of care to all our clients. We have some concerns about regulation and licensing within the industry which relate in the main to consumer protection, ease of entry into the market, bonding and legislation — these are intrinsically linked to consumer protection — and Dublin Airport.

Of all departing passengers from Ireland, 80% have no consumer protection in place. Recent examples of this circumstance have involved Jet Green, FreshAer, Jetmagic and, more recently, EUjet. Of the 40,000 EUjet passengers affected by its closure, 130 were protected in some way by legislation while the remainder had no protection whatsoever. This point was illustrated by the part of the EUjet notice which informed customers that it had ceased to trade and, as it disavowed all responsibility, that passengers should make their own way home. Many of the carriers in question have purported to be, to use the well-known phrase, low cost carriers. In certain instances, Irish airport authorities have encouraged these new entrants or start-ups without, it is clear, having carried out thorough research into the viability of the programmes they were proposing to operate. Questions must be asked about the ease of entering the marketplace and the role the DAA has played in this context. Moneys have been paid out to some carriers, including the national carrier, which have failed to live up to promises to produce certain numbers of passengers. Where these carriers have collapsed, consumers have been left stranded.

Bonding and legislation are linked to consumer protection. Current legislative provisions on bonding date from 1982 while the Package Holidays and Travel Trade Act dates from 1995. Clearly, the legislation is out of date. At a meeting we held with the former Minister for Transport, Deputy Brennan, he agreed with our view that it needed to be updated. The Commissioner for Aviation Regulation also maintains that he has neither the powers in legislation nor the resources to regulate properly. In 1995, when the Package Holidays and Travel Trade Act was formulated, the web was in its infancy. We have seen a significant growth in low cost carrier numbers since. All scheduled carriers have moved towards the provision of a "me-too" of what tour operators provide via the Internet by white-labelling accommodation only websites. In most cases, consumers are completely unaware of the fact that they are dealing with two or three different principals. Tour operators in Ireland have a legal obligation to provide bonding and to comply with the 1995 Act, while scheduled carriers do not. We maintain that consumers need protection in both scenarios.

Legislation must be changed in order to provide transparency for consumers and to level the playing pitch as it applies to scheduled carriers and tour operators. Such carriers do not provide protection for consumers. The issue is being addressed by the CAA in the United Kingdom, where there is a proposal on the table that scheduled carriers and tour operators should contribute to a fund to put protection in place. A figure of £1 sterling has been mentioned as an adequate provision.

Our issue with Dublin Airport relates primarily to the level of service provided for tour operators and consumers. As tour operators, we feel we have been treated as second class citizens by the Dublin Airport Authority which has recklessly encouraged through incentive schemes the growth of scheduled traffic to our disadvantage. Tour operators have developed many routes at considerable financial risk to themselves. The CAR recently sanctioned a 23% increase in charges at Dublin Airport, which our passengers will now be forced to pay for a service which, hopefully, will be provided at an unspecified stage down the road. The lack of infrastructure has resulted in congestion which causes anxiety among passengers who now turn up earlier and the situation gets worse. We would like to see a properly managed facility at Dublin Airport that recognises the value of charter flight passengers and treats scheduled airlines and tour operators in an equitable fashion. I would like to qualify that remark by stating the recently appointed chief executive of the Dublin Airport Authority, from our one dealing to date, appears to have an appreciation of what a tour operator can bring to the airport. Unfortunately, this was not the case in the past.

I thank the Chairman for the opportunity to address the joint committee today and look forward to continuing to work with him.

Mr. Michael Doorley

The Irish Travel Agents Association, ITTA, set up in 1971, is, by and large, the representative body of all licensed travel agents which number approximately 300 and approximately 37 licensed tour operators. The tour operator members of the ITTA tend to be the smaller tour operators or anyone who is licensed by the Commission for Aviation Regulation, CAR, to operate as a tour operator. Our interest in consumer protection dates from the hullabaloo caused by the collapse of Bray Travel in the late 1980s. When Bray Travel ceased trading, the ITTA collected money from all its members and the public to form a fund which, in effect, was the first type of bonding available for consumers. While legislation was being put in place, the ITTA used this bond to rescue the clients of companies which went out of business. The ITTA ensures consumers are protected in the event of a company going out of business.

The three main concerns of the ITTA are, first, that changes have not been made to the legislation introduced in 1982 and subsequently endorsed by the European Union in 1995; second, the iniquitous legislative provision that tour operators must have a bond — as Mr. McDonnell stated, this is not a requirement for airlines and carriers which are effectively putting themselves forward as tour operators; third, the inability of the CAR to police activities of non-licensed bogus self-styled tour operators, of which I will give examples.

The first Act dealing with our business was introduced in 1982, and the 1985 legislation did not alter it very much. Therefore, in effect, legislation that is more than 20 years old has not been revisited to see if it is adequate to cope with the dramatic changes in the volume and mode of travel and meets the requirement to protect consumers.

As I stated, the tour operator members of the ITTA must take out a bond and present it to the CAR in order to get a licence to operate. To get a bond, a tour operator must pledge, either through an insurance company, a bank guarantee or money and-or assets up-front, to cover a percentage of its turnover. It is inequitable that our members must go to the expense of procuring a bond whereas airlines, operating as self-styled tour companies, do not have to provide such a bond. If one looks at the Aer Lingus website, one can book a ski holiday, including flight, accommodation, transfers, hire of skies, representation and so on, everything that a recognised licensed tour operator will present in its brochure, but it does not have to carry the cost of providing a bond or providing protection should it go out of business. It is not that long ago since it was on the cusp of going out of business and who is to say that in a volatile situation such as a fuel crisis or another act of terrorism the aviation industry would not take a severe dip? Should that happen, airlines which are putting themselves forward as tour operators as well as carriers could cause difficulties for consumers. Years ago Aer Lingus had a tour operating business, Aer Lingus Holidays, which went belly-up. When the issue was discussed in the Dáil, it was written into the books that Aer Lingus was never to operate as a tour operator and was to be kept at arm's length from anything of that nature. Airlines such as Aer Lingus, Ryanair, Easyjet and many of the low cost carriers have in different ways become tour operators, yet they do not offer consumers the protection of bonding, as our members do. That is inequitable.

We are concerned at the inability of the commission to police the legislation. I can give examples to show how it fails to meet the standards required. The most publicised case — the Chairman replied to my letter drawing this matter to his attention — was where a self-styled Limerick rugby tour organiser organised charter flights to bring Munster rugby supporters to various matches. This self-styled tour organiser carried on this activity for approximately three years, organising charter flights at prices below cost which regular licensed tour operators could not come near. The commission allowed this to continue without intervention for three years. After we succeeded in persuading representatives from CAR to travel to Shannon Airport to watch an illegal flight take off to one of the rugby games, it came back to us to say it had no authority under legislation to stop illegal charter flights taking off. In February this year 300 people who had booked with this tour organiser turned up at Shannon Airport to travel to Rome for the Ireland-Italy rugby international, but the organiser was unable to pay the airline and the people concerned would have been left stranded except that some local business people put their hands in their pockets and paid for a substitute aircraft to take the supporters to Rome.

The CAR did not act in time. However, there was eventually a prosecution. The fine imposed for operating as an illegal tour operator was €15,000. Do not let anyone tell me that is a deterrent to a person providing an illegal charter operation. It is not a deterrent, as the commission acknowledged at our conference last year. Mr. William Prasiska also acknowledged that he did not have the resources to police illegal activity.

Another example is where money is paid directly to schools which organise ski trips. Under the legislation, this money should go directly to a licensed tour company or travel agent, not a teacher. Two years ago a teacher in a particular school drank the money and the school in question had to provide the money from its own resources to allow the schoolchildren to go on the tour. If it had not done so, the students would have been unable to go on the trip and their money would have gone down the drain.

We are all aware the GAA and soccer groups organise trips to the United States, Australia and hither and thither, many of which are organised by individuals. This is illegal if the individual concerned does not go through a tour operator or licensed travel agent. The walk to Santiago de Compostela to raise funds for a charity is illegal as generally the money goes into the funds of the charity organising the event and one is putting trust in a person not to misappropriate it. The legislation states the money must go directly to a tour company or a travel agent licensed by the Government.

We have had several meetings with the CAR on what is termed within our trade as illegal trading. We have been told by the commissioner that if additional resources are provided, he can hire more staff and ensure this will not take place. It is our contention that there is an accident waiting to happen, that a school teacher, a rugby or GAA organiser will pocket the money and the consumer will not have recourse to it because one is not obliged to adhere to the law of the land and have all transactions conducted through a licensed tour operator or travel agent.

Somebody is going to pocket consumers' money and it will be gone. They will not have any recourse to it because they are not obliged to adhere to the law and have all transactions conducted through licensed tour operators and travel agents. Our contention is that the legislation must be reviewed and examined in detail now. The distribution system and the purchasing trend have changed substantially since the advent of on-line Internet travel companies. Again, many of these companies are not licensed or bonded and members of the public are putting their money at risk. However, that is probably a deeper issue and more difficult to tackle than what we call bricks and mortar travel agents and tour operators.

The legislation must be examined. The Commission for Aviation Regulation must be resourced so it can police effectively and so consumers will be protected against losing their money. I thank the committee for its time in corresponding with us previously.

Ms Carmel Foley

I will, as requested, discuss the Package Holidays and Travel Trade Act, which I enforce. Previous speakers have referred to the Commission on Aviation Regulation, which has other responsibilities in the area, but the one or two week holiday booked from the brochure still remains popular. This is the case all year round and not only in the peak season.

My office directly enforces part of the Package Holidays and Travel Trade Act. The Act also confers rights on consumers which, if not delivered, must be pursued by consumers themselves. I will also refer to the problems created by e-commerce and holidays bought on-line. The Act gives effect to a Council directive. "Package" is specifically defined in the Act as a "combination of at least two of the following components pre-arranged by the organiser when sold or offered for sale at an inclusive price and when the service covers a period of more than 24 hours or includes overnight accommodation: transport; accommodation; other tourist services, not ancillary to transport or accommodation, accounting for a significant proportion of the package".

The term "pre-arranged" is important in the definition. The usual one or two week holiday in the sun covering a flight and accommodation booked from a tour operator's brochure is the simplest example of a package. However, if a consumer makes up his or her own holiday with the appropriate combinations and asks a tour operator or travel agent to price it but does not ask for any advice, it would most likely not come within the ambit of the Act as it had not been pre-arranged when offered for sale.

With regard to offences, the main elements of the legislation that constitute offences relate to the content, accuracy, legibility and comprehensibility of brochures; information to be supplied before conclusion of the contract, before the start of the package and the form of the contract. Breaches of these provisions are offences which are liable for prosecution by me. A package holiday organiser or retailer who is found guilty is liable on summary conviction to a fine not exceeding €3,000.

Breaches of section 22 of the Act are also an offence. The section relates to the important issue of security for consumers should the tour operator become insolvent. The fine is the same, €3,000, for a summary conviction or, on conviction on indictment, the penalty is a fine not exceeding €100,000 or imprisonment for a term not exceeding two years or both. Obstruction of authorised officers, that is, the inspectors from my office, or refusal to comply with their requests or requirements also carries the same fines and penalties. These fines, which are now quite substantial, were doubled recently at my request, as was the period for taking prosecutions. Brochures are now being produced earlier and the new period of two years from release of the brochure gives a more realistic timeframe for investigating complaints and bringing them to court, if that course of action becomes necessary.

With regard to refund of money and repatriation, I referred earlier to the section 22 provisions for security for consumers, which protect them against loss of any money paid over and being stranded abroad in the event of insolvency. It is important to point out that Ireland, unlike some other member states, has, since 1982, had in place legislation requiring tour operators and travel agents to be licensed and bonded as protection for consumers travelling abroad, regardless of whether they are on package holidays. The Commission for Aviation Regulation now enforces this legislation, formerly the responsibility of the Minister for Transport. What was new in the Package Holidays and Travel Trade Act was the requirement to have security for home consumers buying home package holidays.

In fact, I received a query recently about a home package holiday. It involved transport by bus, hotel accommodation and a Joe Dolan concert. The consumer contacted us to inform us that Joe Dolan was now unavailable for the concert and to find out if this was a material change to the contract. I believe it was but I am from County Westmeath. The consumer had rights.

Chairman

As he is sick, he is entitled to get the benefit of illness.

Ms Foley

Very true. The other elements of the legislation mainly give consumers rights in regard to their contracts. Some of these are implied rights, regardless of whether the contract contains them. If something goes wrong and the tour organiser or travel agent is not prepared to rectify the matter voluntarily, these rights are enforceable by the consumer in the courts. This is often the Small Claims Court, where the consumer pays no more than €9. There is no question of being intimidated by having to get legal representation or of that cost being incurred by the consumer.

General rights under the Act allow a consumer to transfer a booking subject to certain conditions. Section 18 sets out the alternatives an organiser must offer a consumer when the organiser has to alter significantly an essential term of the contract or cancel it entirely. Section 19 relates to what the tour operator must offer the consumer if a significant proportion of services contracted for is not provided.

Section 11 provides for compensation for consumers who suffer damage as a direct consequence of and attributable to their reliance on information which is false or misleading. Section 18 also provides for compensation for the non-performance of the contract except in certain circumstances. These stated circumstances are cancellations arising from force majeure or because the number who agree to take the package is less than the minimum number required and the consumer is informed of the cancellation, in writing, within the period prescribed in the contract. Force majeure is seen to be acts of God and acts that are outside the control of the operator.

Section 14 sets out the essential elements of a contract. Prices set out in brochures can be revised but section 17 provides that any term in the contract to that effect is void unless it provides for upward and downward revision and clearly describes how the calculation is made. I am not aware of downward revision in practice but I am open to correction if there have been downward revision cases. Revisions can only be made in respect of transport costs, including fuel costs, dues, taxes or fees such as landing charges and exchange rate variations. No price increase can be made within 20 days of the departure date.

Holiday inquiries and complaints account for approximately 3% of the total number of calls received by my office, that is, approximately 1,000 complaints per year. This figure has remained static for the past two years, even though the number of people travelling and the number of times they travel per year is increasing substantially. Of these inquiries and complaints, the majority relate to civil law issues rather than statutory breaches of the legislation. This means that they are related to deficiencies in the fulfilment of the contract, such as accommodation not being up to the expected standard. Sometimes what is called a three or four star hotel in one country is not the equivalent in another. People might also talk about the accommodation being dirty or insufficient in some other way.

Sometimes, the complaint revolves around a change in the booked accommodation or the location. In these cases, the office will advise consumers on their rights and point them in the direction of the Small Claims Court if they have not been able to resolve the matter with the operator or travel agent.

In the case of travel disputes, consumers use the small claims procedure quite successfully and cases are usually reported in the media. People are aware of the Small Claims Court. There was a case referred to in the newspapers yesterday where a person had a difficulty with the car hire part of a fly-drive package and was awarded compensation by the court.

An example of the type of situation that the legislation can deal with is where a brochure featured holidays in America that included prices for non-stop flights from Dublin to New York. A consumer had been charged an extra €200 per person for direct flights from Ireland. We raised this issue with the holiday company which explained that it had taken the text directly from its UK brochure where the reference to flights meant departures from the UK, hence the additional charge for flights from Ireland. Following our intervention, the company added a note to each of its brochures stating that some references to flights in the brochure referred to UK departures and that additional supplements might apply for direct flights from Ireland. It also undertook to amend all future brochures.

My office advises consumers on their rights under the 1999 Montreal Convention, which covers issues relating to death, accidents and lost or damaged luggage. Of course, general legislation such as the Sale of Goods and Supply of Services Act, the Consumer Information Act and the misleading advertising regulations is also relevant.

Previous speakers have referred to e-commerce and to the phenomena of people booking their holidays directly on-line. Such use of technology has implications for the Package Holidays and Travel Trade Act. As more and more people shop on-line, it is becoming increasingly popular for consumers to arrange their own holidays, booking their transport and accommodation separately on-line as opposed to availing of ready made package holidays. Due to the tight definition of package holidays in the legislation, these holidays fall outside the protection of the Act. We will continue to focus on this in the future and, in particular, to ensure that all websites meet the general requirements of the e-commerce legislation, namely, that all information is correct and available, that people can correct any errors in their inputs and that the provider's geographic address is supplied. We must ensure that people are not logged on to deceptive websites offering holidays that do not exist and that they know with whom they are dealing, even through a website.

The new regulations on delays and denied boarding enforced by the Commission on Aviation Regulation also cover flights that are part of package holidays.

I hope this presentation has been helpful to the committee and I will be glad to answer any questions members may have.

Chairman

If a charter flight is delayed, who is responsible for looking after passengers? Is it the responsibility of the tour operator or the airline?

Mr. McDonnell

In the case of a package holiday, the tour operator will look after passengers in the event of a delay. If one looks at a schedule airline, in the event of a delay — as happened quite recently with Aer Lingus and Ryanair, where the delays were considerable — passengers are told to turn up the following day, later that same day or whenever is appropriate. With a tour operator, staff in the overseas resort or in Ireland will, depending on the length of the delay, generally take passengers to a hotel where they will stay overnight if necessary. The tour operator's staff will look after passengers until the aircraft takes off or a replacement is found.

Chairman

In that event, who is responsible for paying compensation? There was an incident recently where passengers were sent to a departures area and the tour operator knew that there was no plane available. The passengers were left in the departures lounge, in some cases for over 40 hours.

Mr. McDonnell

I am not aware of the particular case to which the Chairman is referring.

Chairman

Mr. McDonnell should be aware of it.

Mr. McDonnell

Is the Chairman referring to the Helios Airways case?

Chairman

Yes.

Mr. McDonnell

In the case of Helios Airways, the Cypriot carrier concerned had a total of three aircraft. Obviously, as a result of the crash, a considerable proportion of its fleet was taken out of action. It happened in the height of the summer, on a weekend. Whether there was a crash or the aircraft had, as we say in the industry, "gone technical" and there was a delay, the airline would try to source a replacement aircraft. That process, in the height of the summer and on a weekend, will prove extremely difficult. The situation is very fluid and changes by the minute as an airline tries to source a replacement aircraft. If the tour operator is aware of the length of the delay and is, for example, advised by the airline that it will be 24 hours or 48 hours before a replacement is secured, it will take the passengers out of the airport, bring them to a hotel and look after them. If, on the other hand, the airline only tells the tour operator that it is trying to source a replacement aircraft, the situation is extremely fluid and a replacement may be found at any time. Therefore, unless the airline gives the tour operator a definitive response in terms of how long the delay will last, the tour operator cannot act. It is looking to the airline for guidance.

Chairman

In that case, Mr. McDonnell's personnel told people to go to departures knowing that there was no aircraft available to take them home.

Mr. McDonnell

I am not sure whose personnel——

Chairman

It was Mr. McDonnell's personnel.

Mr. McDonnell

Is the Chairman referring to personnel employed by Panorama Holidays?

Chairman

Yes.

Mr. McDonnell

Is he stating that personnel from Panorama Holidays told the passengers to go to the departures lounge?

Chairman

Yes.

Mr. McDonnell

I am not aware of what happened on the ground. All I know is that the people in Helios Airways were trying to source alternative aircraft.

Chairman

The people in Helios Airways informed Mr. McDonnell's personnel that there would be no aircraft available until at least the following day. This was confirmed by the embassy in Nicosia the following day. The tour operators had been informed but they still allowed people to proceed to the departures section of the airport.

Mr. McDonnell

The information I have is that the airline was continually trying to source a replacement aircraft. It was trying to deal with the fallout from the accident as well as attempting to find a replacement aircraft and I am not aware of the fact that the tour operator was told that this would take 24 hours.

Chairman

The tour operator's personnel told people on the buses on the way to Larnaca Airport that they did not know when the flight would take off, that it would be delayed indefinitely.

Mr. McDonnell

The term "indefinitely" applies to a fluid situation, which can change at any moment.

Chairman

Who is responsible for compensation for the 400 people affected?

Mr. McDonnell

I am not sure that there is any compensation due to those 400 people. The Director of Consumer Affairs might have an opinion on this matter but I am not sure, in a force majeure——

Chairman

It depends on what one calls a force majeure. Regulation 261 of 2004 states that if anybody is delayed over X number of hours, there is a responsibility on either the tour operator or the airline to pay compensation and to make necessary arrangements.

Mr. McDonnell

It is open to interpretation as to whether it is the tour operator or the airline that is liable. I am not sure but perhaps the director will give us her opinion on the matter.

Ms Foley

I do not know. The Commission on Aviation Regulation is dealing with this matter. I do not know whether it has been able to assist the Chairman in getting an answer to his question. I understand the frustration that must have been felt by people in what was a nightmare situation. The issue centres on the meaning of the term "force majeure”. No airline intends that one of its aircraft should crash but, at the same time, people who have been inconvenienced for a long period must deserve to be recompensed.

Chairman

The force majeure event was a plane crash that had taken place the previous week, not the previous day. If the crash had taken place the day before, people would have understood.

Deputy O. Mitchell

I thank the delegates for their presentations. Many issues have been raised which I had not even thought of regarding problems in the travel business. Mr. McDonnell said that tour operators felt that they were second class citizens in the eyes of the Dublin Airport Authority. I wish to assure him that everyone I have spoken to who has used Dublin Airport has felt like a second class citizen. The new management team at the airport seems to recognise that there is a major problem. However, it will be many years before people will feel they are appreciated and treasured customers. The level of under-provision is enormous. Whether one is moving freight or passengers or operating any tourism or other services, the conditions for every user, not to mention the customers, are appalling. Conditions are improving and some efforts have been made but it is a significant problem.

The issue approached by the first two speakers was competition. I understand that competition is not welcomed by any business but it is welcomed by consumers. The speakers referred to having a level playing pitch between tour operators when someone is booking a holiday through a travel agent and when doing it oneself, namely, going on-line and booking a Ryanair or Aer Lingus flight and a hotel through their websites. The speakers said the latter option does not have the same level of protection, bonding and so on. Is this not the essence of competition, that there is not a level playing pitch because these are not the same products? When I go to a tour operator I ask for a particular service but when I go to Ryanair I know I am sacrificing the convenience, comfort and certainty of a tour operator for the value and choice available to me on a website. Is it reasonable to expect the same level of protection if I am buying what I know to be a cheaper or better value product? Perhaps it would not be better value and I have insulted our guests but it would be the budget way, although this is not always the case.

I find the speakers' point about the illegitimacy of travel clubs or similar arrangements to be strange. For example, if I arranged for the committee members to go on holiday and collected their money, is that an illegal act? This is a stretch of the imagination.

Deputy P. Power

One could call it the Houses of the Oireachtas travel agents.

Deputy O. Mitchell

Perhaps, the Houses are the exception to many rules. On budget airlines providing services here, I can understand why this point was made but could Ms Foley indicate what protections are possible? Mr. McDonnell among others looked to the Dublin Airport Authority to provide some type of guarantee that these were reputable companies. Are there not certain protections afforded to us by the Companies Act 1990 against reckless trading and so on? Is it possible to provide more than travel insurance? Is it not more important that people are given information and know they are taking risks if they make this type of booking rather than trying to protect them against every eventuality?

Mr. Doorley

Price is not an issue for us in terms of comparison. Competition is good. When it comes from low cost carriers it has the effect of regular tour operators reducing prices and having the capacity to do so by adjusting the way they do business. Price is not the issue. Rather, consumers have no protection whatsoever. In the United Kingdom recently, 400 people were left without any compensation whatsoever after the EUjet collapse. This could happen here at any time. For example, it could have happened in the case of Jet Green, which received a licence from the Commission for Aviation Regulation, CAR, and ceased trading within one week. There was no consumer protection in that case whereas with our members and members of ITOF, there is consumer protection for every product bought. No matter who goes out of business, money is protected. Why are other people who are putting similar products on the market not required to offer consumer protection to the level we must reach?

I must correct one of my previous comments regarding Aer Lingus. It received a temporary tour operator's licence to operate a Dublin-Orlando flight but not for the rest of it. I also forgot to introduce the chief executive of the ITAA, Mr. Simon Nugent, who is sitting behind me. The issue is not one of price but of consumers having equal protection given to them by whatever source they buy their product from.

Deputy O. Mitchell

What are Mr. Doorley's concerns?

Mr. Doorley

We learned a lesson from Bray Travel. Our members would have no credibility.

Deputy O. Mitchell

Does Mr. Doorley believe it would reflect badly on his group's travel agents if airlines did not offer this type of protection?

Mr. Doorley

We have no choice. We must have a licence. Our financial viability is assessed once a year by the CAR and our licences are reissued on the same basis. If one does not reach a certain level of financial viability, one does not get a licence. To get a licence, one must put a bond in place, be it a bank bond, insurance bond, cash up front, assets or so on. Our competition is not required to do so.

Mr. McDonnell

The issue is not one of competition. The Irish Tour Operators Federation is not afraid of competition because, obviously, there is competition among its members, which has driven down the price of package holidays over the years. The issue is one of transparency. People using the Internet and what the industry now refers to as self-packaging are not aware that they are dealing with two or three different principals. They have accessed an airline's website, then a hotel's website and a car hire website but as far as the consumers are concerned they are still dealing with one principal. They are not.

Deputy O. Mitchell

Perhaps their information is inadequate.

Mr. McDonnell

These facts only come to light when something goes wrong. As Mr. Doorley said, we are forced into a situation where we must provide a bond to protect the consumer whereas none of those other principals, particularly airlines, must do likewise. If an airline goes out of business, the consumers' money is gone. Only in cases such as EUjet, FreshAer or Jet Green do people realise their money is gone and they cannot get it back.

Deputy O. Mitchell

People know this and are making a choice to take the risk.

Mr. McDonnell

I do not think they know that is the case.

Deputy O. Mitchell

Perhaps an information campaign is required.

Chairman

Perhaps what is required is an addendum on those flights stating people do not have insurance and are basically on their own. It was mentioned that someone has responsibility when everything goes wrong. My question related to who was responsible for the Helios situation but our guests cannot tell me whether it was Helios or the tour operator.

Mr. McDonnell

In my opinion, the Helios situation was one of force majeure.

Deputy Connaughton

How did it constitute a force majeure?

Mr. McDonnell

It is obviously a force majeure if an aircraft crashes.

Chairman

One cannot call it force majeure if it happened a week previously. It is only a case of force majeure if it happens within 24 hours.

Mr. McDonnell

I do not think there is a definitive time in which one can say something is force majeure. Taking a hurricane going through a resort as an example, it could wipe out the resort for three or four months.

Chairman

The resort has been wiped out by that stage. Someone must accept alternative accommodation just as if something had gone wrong under normal circumstances. Some people go and a decision is taken to allocate accommodation on arrival, which is their prerogative. In the Helios case, however, no one seems to be responsible. I do not want to say so to Ms Foley but she may ultimately be the one to determine the result. A total of 400 people were treated very shoddily, to put it mildly, in Larnaca. They were moved to the departure area even though the tour operator knew there was no airplane.

Mr. McDonnell

The Chairman mentioned this occurred one week after the accident but for a period of several weeks after that accident, the airline was still trying to source a replacement aircraft during the height of the summer. Sourcing replacement aircraft, particularly at weekends and whether it is due to a technical problem or a lack of——

Chairman

On behalf of the consumers involved, I want to know who was responsible for the situation in which they found themselves? Was it the tour operator or the airline? It is a matter that will be determined eventually but it would make matters easier for many people were they to know who was responsible.

Mr. McDonnell

It was force majeure and no one is responsible. If the tour operator or airline were responsible for a particular reason, they would come clean and say it was their fault, it should not have happened, they were sorry and will pay compensation, which has happened in the past with both airlines and tour operators.

Chairman

However, Mr. McDonnell is still not in a position to say who is the——

Mr. McDonnell

No, because it is my opinion that it was force majeure and nobody was responsible.

Chairman

It was not force majeure to let people into an airport knowing that the tour operator had no aeroplane.

Deputy Shortall

I am interested in pursuing the point made by the Chairman. Obviously, the Helios case was an extreme example. The tour operator knew it would not have an aircraft for at least the following six hours. It seems indefensible that passengers were allowed into the departure area. Will Ms Foley give us her opinion on who was responsible and who is liable with regard to compensation? That example is replicated in less extreme forms on a regular basis throughout the high season where passengers are waiting for flights to Spain or Portugal and face six and seven hour delays. When passengers are allowed into the departure area, the tour operator knows the aeroplane has not left Spain and that they will be waiting for several hours. There is a lot of dissatisfaction among the public about this and the lack of consideration for people who are tired and trying to cope with young children in the early hours of the morning. Does Mr. McDonnell accept responsibility in that regard and does he have any proposals to improve the level of service to consumers? I am talking about delays of between six and eight hours.

Mr. McDonnell made various points about Dublin Airport and the lack of capacity due to lack of investment during the years. What does he hope an airport authority would do to facilitate him? He also made negative comments about landing charges. How do these charges compare with those at foreign airports used by tour operators?

I take Mr. Doorley's point about the need to bond airlines. We have seen examples in recent years where people have lost out and there have been calls to introduce a system of bonding. I find it difficult to understand where Mr. Doorley is coming from on this issue. While I accept his point about the need for a level playing pitch, I hope he is not suggesting there will be a rowing back on the Internet booking system used.

Mr. Doorley

It has nothing to do with the distribution system. If the option is there for the airlines not to be bonded at the cost incurred, why do travel agents not have this option?

Deputy Shortall

It is purely from the point of view of providing security. It is not a competition issue.

Mr. Doorley

Absolutely.

Deputy Shortall

It is about providing security for customers. I think we would all agree with this. It is probably an issue the committee should pursue.

Chairman

We can take it up with the aviation regulator who will come before us.

Deputy Shortall

We will not wait for the next airline to go to the wall.

Chairman

That is correct.

Deputy Shortall

The Chairman has given us a timely reminder in that regard and we will pursue the matter separately.

Mr. Doorley mentioned the informal arrangements made in places such as schools and football clubs. I do not know if one can legislate for this. The person involved is generally not operating as a tour operator. It is an informal arrangement.

Mr. Doorley

It is the same thing. Effectively, the person concerned is operating as a tour operator. In the case of a school tour, if the parents give a cheque to the teacher who is organising it and the money is placed in the school account or the teacher's own personal account, under the legislation, it becomes an illegal activity. Any moneys paid over should immediately be given to a licensed tour operator or travel agent.

Deputy Shortall

Is it not a question of timing? Most groups use a tour operator. It is simply a matter of collecting deposits and further instalments where there might be a time delay.

Mr. Doorley

One would collect most but not all of the money. Self-styled tour organisers organise the flights, the accommodation directly with the hotel and transport. They go nowhere near a licensed tour operator or travel agent. Why do I have to meet the heavy cost of bonding and licensing when the CAR allows people to behave like this in the public arena?

Deputy Shortall

A teacher is probably not the best example. Does Mr. Doorley know if this is taking place on a widespread basis?

Mr. Doorley

It is enormous. We wrote to the Minister for Education and Science who I gather has written to all school principals and boards of management advising them that such activity is illegal. I am sure Deputy Shortall's colleague from Limerick will endorse this.

Deputy Connaughton

Imagine the trouble there would be if there was a GAA meeting some night.

Chairman

If I decide that four or five of us should take a flight somewhere and we book on the Internet, I will be committing an illegal act because I will be booking for others.

Mr. Doorley

This phenomenon only started in recent years, particularly with the advent of the Internet. It is one of the reasons the legislation must be reviewed. If there is no cut-off point or definition as to who is a tour organiser, it is an open playing field for everyone. People trust that the person collecting their money will not go to the pub and drink it all. Rather than relying on trust, the legislation should be updated.

Mr. McDonnell

I will address Deputy Shortall's questions regarding tour operators. She referred to delays of six or seven hours at Dublin Airport. There are always delays in high summer. The difference between tour operators and scheduled airlines is that if there is a six or seven hour delay on a scheduled flight, passengers will be left at Dublin Airport. In the case of a charter flight, the tour operator will provide welfare. In other words, the tour operator will provide vouchers for meals, snacks and so on, depending on the length of the delay.

Delays can sometimes be caused by slots at Dublin Airport which brings me to the point I made about the Dublin Airport Authority and the bias it shows towards scheduled airlines. I reiterate that tour operators are treated like second-class citizens. Deputy Shortall asked about facilities at Dublin Airport. I think we have spent the last six and a half years trying to get a facility at the airport where we can service passengers — a tour operators' dedicated area. We did have one at one stage but for a mere three months. One half of it was taken back again, despite the fact that we had been promised we would get something in the extended building at the airport. This is as much as we are looking for but it seems to be beyond the capabilities of the Dublin Airport Authority. There is an enormous difference between what a scheduled airline does and what a tour operator can do in the event of delays. A tour operator will provide welfare for passengers whereas a scheduled airline will not.

Deputy Shortall

Mr. McDonnell is saying there is a definite bias in favour of scheduled flights.

Mr. McDonnell

There is a bias in favour of scheduled airlines. I will cite the Algarve as an example. It is a region with which we are all familiar and to which tour operators have been operating for the past 30 years. If a scheduled airline states it is going to operate a scheduled service from Dublin Airport to Faro Airport, there is an incentive scheme under which Dublin Airport will make a contribution towards the airline's cost by way of measures such as a reduction in landing fees.

Deputy Shortall

They are marketing strategies.

Mr. McDonnell

They are not really. This is just reckless.

Deputy Shortall

Is Mr. McDonnell saying there is discrimination against charter flights in such matters as landing and take-off slots?

Mr. McDonnell

Yes, a scheduled airline will always get priority.

Deputy Shortall

By its nature, if it is a scheduled flight, it will. Is Mr. McDonnell saying there are difficulties in getting approval for slots?

Mr. McDonnell

Dublin Airport is not yet slot-controlled. It remains to be seen, therefore, when it does become slot-controlled, where the slots will go.

Chairman

On that point, can Mr. McDonnell give us some detail in order that we can take up the matter with the Dublin Airport Authority?

Mr. McDonnell

On its incentive scheme.

Chairman

Yes.

Mr. McDonnell

Yes.

Chairman

Will Mr. McDonnell also give us some details on the number of charter or holiday flights that have been delayed due to Dublin Airport's inability to provide tour operators with slots?

Mr. McDonnell

Yes.

Chairman

When I say that, I mean tour operators are told that if their incoming flight cannot land in time, it cannot go out again on time. People say the delay starts in Faro Airport and is added to in Dublin Airport. That is their gripe. They are told their flight is due to leave at 10 a.m. When they are in the departure lounge at the airport, the "delayed" sign comes up and they are told the flight will leave at noon or 1 p.m. In some cases the aeroplane will not have left the original destination. If Mr. McDonnell can give us the information, we will follow up the matter.

Mr. McDonnell

I will obtain for the Chairman a copy of the incentive scheme and a copy of the total number of chartered and scheduled flights and the percentage of delays on both.

Deputy Shortall

We want to see the percentage of delays as a result of management at the airport.

Deputy P. Power

I thank the delegation for coming here today. Many of my questions have already been asked. I wish, however, to discuss two issues.

Mr. Doorley mentioned that travel operators must endure the heavy costs, both financial and administrative, of licensing and bonding. That has been a complaint across the board. Does that amount to anti-competitive activity or does it put the travel operators at a competitive disadvantage with the established airlines? I see heads nodding behind Mr. McDonnell. If that is the case, it appears that there ought to be some redress or a complaint should be addressed to the Competition Authority. It is illegal under the Competition Act for commercial entities to gain a competitive advantage by virtue of statutory restrictions imposed on other commercial entities. I advise the travel operators to pursue that route as best they can, although I agree the legislation needs to be tightened.

My next question is for Mr. Doorley. I am familiar with several of the people who were caught up in the problem surrounding the Munster match in Rome and the operator from Shannon Airport. It is agreed that he was acting illegally but where does the fault lie in terms of ensuring that he did not reach that point? I know many people who went through hell in that airport for a long time. Who should have policed that situation before it arose? Mr. Doorley mentioned the shortage of teeth and resources available to the CAR but could he elaborate on that?

I wish to pursue the questions the Chairman and Deputy Shortall asked Mr. McDonnell about the Helios situation and the position in Greece. Mr. McDonnell's position is that this was a force majeure but I know some people who were on that flight. A force majeure is not an act of God or divine intervention. A human operator brought those people into the lounge. That might have been precipitated by a terrible event some time previously but the cause of inconvenience and stress to those involved was the act of an operator who brought them into the airport in the full knowledge that they could not leave in an aircraft. That is where the fault lies.

Mr. McDonnell tries his best to represent travel agents and has done so brilliantly over the years but events such as that under discussion have done little to enhance the reputation of travel agents. I accept that it was a one-off event. I hope such difficulties will never again arise. To suggest that what happened at Larnaca Airport was an act of God is disingenuous.

Mr. Doorley

The CAR is responsible for ensuring that an illegal operator does not operate out of Shannon Airport. It is responsible for the legislation and for ensuring that the latter is implemented. That lady operated for three years and each year we either met the CAR or wrote to it about her company. The CAR felt that, to an extent, its powers were restricted. It went to Shannon Airport one weekend when the illegal flight was operating but could not stop the flight at that stage. That may have been because of the fracas that would occur if the flight was stopped and 300 people were left at the airport.

Bill Prasifka addressed our conference last November. He was quite open about the inadequacy of the legislation and the penalties. There is no deterrent and he does not have the resources to ensure that this activity does not continue. It is happening at a significant level throughout the country among GAA clubs. I have been involved in GAA clubs and what is happening in Cork is happening all over the place. It is wrong, illegal and should not happen. Trust is placed in an individual to do this properly but some ignore the legislation.

In my opinion, the airline is at fault in the case of the Helios flight. Legislation identifies the airline as the primary source of compensation and recourse to that would probably be through the tour operator.

Mr. McDonnell

The Director of Consumer Affairs mentioned 1,000 travel-related complaints in a year. Even if one were to assume that all those complaints concerned package holidays, on the basis that we carry over 1 million passengers a year that is a ratio of 0.1%. This statistic indicates that members of the Irish Tour Operators Federation do not trade recklessly in regard to customer care. The incident was a one-off.

I accept the Deputy's point about people being brought into the airport. No member of our federation would bring people into an airport in the full knowledge that they had a 24 or 48 hour delay and abandon them. Delays happen throughout the year, particularly in the height of the season and people are not abandoned. They are brought from the airport to hotels.

The Helios situation was a one-off and extremely difficult because the airport was dealing with the fall-out of the crash and continues to do so. I apologise if I appear defensive in putting it down to force majeure but no tour operator would bring people into an airport and abandon them.

Chairman

That is what happened.

Mr. McDonnell

I accept the fact that it happened.

Chairman

The people were brought into the departures lounge and the representatives said to those on the buses that the flight was delayed and they did not know for how long.

Mr. McDonnell

In those situations involving 400 people and several representatives on the ground, the tour operator concerned talking to the representatives, and other tour operators talking to airport staff, there is a plethora of information and people are misquoted or are misinformed. No tour operator would bring people into an airport——

Chairman

There was no misquote in this case.

Deputy Connaughton

As most of what I wanted to ask has been covered already, I will not go over the ground again. There are two major aspects of this issue which we should ponder. One is the case of an airline that touted for holiday business and went out of business 24 hours later or less. I was of the opinion that these companies underwent intensive financial vetting before they got a licence. How thorough is that vetting or is it a superficial process by which the operator shows the colour of its cheque book and no more? How could any business operation be in a position to tout for business today and go out of business ten or 12 days later after being vetted?

In the height of the summer, when every aeroplane that can fly is flying somewhere, there is serious pressure. I know very little about the business apart from having travelled on aeroplanes. I could imagine that if a company has 300 or 400 holidaymakers in the height of the season in a place where there is almost no space available, it would want to be a magician to help them. It must be difficult for a company to do that. That is how I see it. That is why so many people are asking what help they will receive. It is all about insurance, just as we insure our health or anything else. That level of insurance is available in the event that something dramatic happens beyond our own control; it is to provide assurance.

Against that backdrop, the delegates have had to put up a fight to show to the travelling public that when something goes wrong, insurance means something to them. In other words, there is a benefit and advantage to being with a certain firm. Much of the time that appears to be the case, but there are dramatic instances where it does not happen. All of a sudden people say they will go to the local GAA or rugby club or surf the Internet and get it that bit more cheaply or quickly. Most of the time they will be wrong, but one can recognise how they might think this. Nothing said here today can convince the public that there is a definite, constant advantage in going through the system.

I am sure the delegates are aware of this. I remember the Bray Travel episode very well. There was a great deal of talk about it at the time. It was generally believed that thereafter, whatever steps might be implemented, one would never see it happening again. One should never say "never", no matter what business one is in. Not a year goes by without a high profile case of some description, no matter what the bonding is or the CAR does with finances. With respect, that is also true no matter what the Office of the Director of Consumer Affairs does.

Are we any nearer to a situation where the travelling public will be able to say that if it does things in the manner the Office of the Director of Consumer Affairs sees as the legal one, it will have a happier holiday and fewer problems than otherwise? Most will want to know this if they hear or see this debate.

Mr. Doorley

The bonding issue has nothing to do with vetting the financial viability of an air carrier; that is a different issue. The CAR has the final say on whether a licence should be issued to an airline to operate as a tour operator. Jet Green tried to operate as one camouflaged as a scheduled carrier. We have that issue with the CAR. We have met and written to it. How could it have licensed an airline to operate only to see it go bust within two weeks? We have still received no answer. It is different from bonding which is for public protection. People's money is safe if they pay it to a licensed tour operator or travel agent and that company ceases to trade. This has been the case since 1982. Any member of the public who has booked with ITAA or ITOF members which are licensed and bonded has never lost one penny.

Deputy Connaughton

Does that happen often? Has there been much money paid back as a result of this happening?

Mr. Doorley

There have not been that many closures of licensed tour operators or travel agents in recent years. The most recent was this year when there was a claim of €109,000 which was paid back to the consumers who had lost it from the bond that the ITAA——

Deputy Connaughton

Did they have long to wait for their money? What was the conduit through which they had to go?

Mr. Doorley

No, they applied to the CAR and proved that they had paid their money. In this case, their money was refunded quite quickly. There is no undue delay. With any collapses that have happened in the past 15 or 20 years, the process of refunding money to the public has been quite efficient; the CAR has performed very well. Once again, the issue of why not to deregulate the whole business arises, in order that one need not have a bond or licence. One is then like the GAA club, rugby club or airline without that requirement. Why am I penalised by the cost and having to work within certain restrictions?

Deputy Connaughton

Once people understand the value of the product, they will accept it.

Mr. Doorley

Yes, there is an element of that.

Mr. McDonnell

People begin to understand the value of the product when something goes wrong, as in the EUjet or Jet Green scenario. It all looks great until something goes wrong and then they realise there is no protection in place. That is human nature. On paper it looks like great value until something goes wrong.

Chairman

What about the estimated cost to consumers per flight of having such travel insurance in place?

Mr. Doorley

It is difficult to say, since the bond that I take out in my company covers scheduled and chartered flights and ferry travel, as well as any operation whereby people leave the country. In one sense, one is spreading it over thousands of people processing their business through my office. In a small office I would have to pay €6,000 per year, plus a licence fee to the Department, as well as obligations to continue to provide proof for it that the company is solvent. With bigger companies, the cost will rise accordingly. Right now, there are cases where people involved in the industry are having to give personal guarantees to get a licence, which is a huge imposition on what is sometimes termed the "momma and poppa" travel agency in a rural town or a city. Most are small, family-run companies. That extra pressure on them to provide the bonding and financial arrangements that the CAR requires is putting a strain on them that is not on unlicensed operators.

Chairman

In what way does the CAR set the bond for an individual? Is it based on the previous year's turnover? What percentage is it?

Mr. Doorley

For travel agents, it is 4%, and for tour operators, 10%.

Chairman

In other words, for every €1 million of turnover, one must provide a bond of €100,000, which is taken out by means of an insurance policy. I take it that it is not the sort of thing one would wish to carry personally.

Ms Foley

I am totally opposed to any reduction in the requirements to be licensed and bonded, no matter how heavy Mr. Doorley might say they are. However, I support him when he says the likes of EUjet and Jet Green should have to cover their passengers. I hope the Department of Transport might make some proposals in that regard.

Chairman

We will take up that matter with the aviation regulator when he comes before us. If there are any specific issues that the delegates believe we should raise with him, we would be only too glad to do so. Perhaps they might forward them to us. He is due to appear here on 2 November. If we receive them within the next 14 days, that will give us time to circulate them to members and the aviation regulator, saying that we would appreciate a briefing or statement regarding X, Y and Z. There are obviously problems regarding the entire operation, including the tour operators' difficulties and those of the delegates. The aviation regulator has his own problems too, as he said to the delegates' annual conference.

Ms Foley

Regarding the Helios case and, as other members mentioned, people who endure long delays, although not as extreme, I had not gone into the new EU regulation, which the Chairman mentioned. At the same time, however, I believe the regulation will come into play. People should complain. It is true that we received only 1,000 complaints last year, but in the Helios case, I urged everyone involved to complain to their tour operator, whose address in Nicosia we gave them, and to the CAR. There would be one letter to all. It is only if people complain that there will be a reaction. In this case, the courts will probably end up deciding whether force majeure was in play. No doubt the CAR will assist the committee in elucidating this.

Chairman

It would be good PR from the point of view of the tour operators involved. They will have a list of those on the flights. They should write to them stating how they see the position. The tour operators believe Helios is responsible.

Ms Foley

The regulation states that if one is travelling as part of a package tour and it is determined one is entitled to compensation, the airline must compensate the tour operator which must then pass on the money to the consumer. That is laid down very clearly in the new regulation which has only been in effect in Ireland since February last. It is being appealed by the low-cost airlines but, for now, it is in place as a consumer protection measure. In many cases, once the initial nightmare has receded, people do not write a letter of complaint. This is not exclusive to problems in regard to travel.

Chairman

It is the same with many consumer products. People are often too busy and, having lost the day, decide to move on. I thank the delegates, Mr. McDonnell, Mr. Doorley and Ms Foley, for their forthright answers to our questions. We will be glad to raise any questions they have with the aviation authorities.

There is a suggestion we should invite representatives of the Dublin Airport Authority on the same day as the aviation regulator. Is that agreed? Agreed.

Senator Morrissey

Will that meeting take place soon?

Chairman

It will be held on 2 November.

The joint committee adjourned at 4.40 p.m. until 2.30 p.m on Wednesday, 19 October 2005.