Taylor on Travel

The necessity of overhauling the consumer protection system for package-holidaymakers is clear from the annual report by the body that oversees the scheme - ATIPAC.

This is not a form of Tupperware or handy rain apparel, but the Air Travel Insolvency Protection Advisory Committee.

Let's get the other acronyms out of the way. ATIPAC advises the consumer protection group of the Civil Aviation Authority (CAA), the aviation regulator which also oversees the Air Tour Operator Licence (ATOL) system.

A UK tour operator cannot do business without an ATOL and, until April this year, was required to provide a bond - its size determined by the number of people the company sent on holiday. The bond covered the cost of repaying clients or repatriating them in the event of the company - or any other supplier of the holiday - going bust.

The Air Travel Trust Fund, with a £30-million overdraft facility guaranteed by the government, provided a back up if a bond did not cover the number of advance bookings or a company collapsed in peak season. Some years it was needed more than others.

It was needed more than others two years ago when, in August 2006, Tapestry Holidays failed. The tour operator's bond covered £1.7 million of the resulting costs, but the fund had to pay out a further £2.5 million. This came close to bankrupting the scheme. The government had to extend its guarantee of the fund's overdraft from £18 million to £30 million.

Fast forward to this year and 25 travel company failures in the 12 months to the end of March resulted in a bill to the fund of just £374,000, despite the total payout to consumers reaching more than £5.3 million. That is because the bonds broadly covered everything. The system worked.

So in April it was scrapped.

The new system is funded by a £1 levy or ATOL Protection Contribution (APC) added to package-holiday prices and some seat-only sales on charter airlines - sales that are ATOL-protected.

The requirement for bonds disappeared for all but a handful of companies - those that have modified their business or reported problems and new entrants to the industry.

The tour operators were happy - bonds generally cost them more than £1 per passenger to put in place.

The government was happy - it wants the trust fund overdraft paid off and the APC payments should do that over the next three years.

ATIPAC was happy - it has argued for a levy on holidays to provide funds for consumer protection for 15 years.

Everyone was broadly happy, except for the fact that scheduled airlines remain outside the scheme at their own insistence - a fact that galls the tour operators, the CAA, ATIPAC and almost everybody but government ministers and the airlines.

Anyway, the point about the ATIPAC report is that interest payments on the overdrawn fund were at least two-and-a-half times the total pay out for company failures.

We won't know the total interest payments for another week or so, upon release of the annual accounts. But the fund paid £900,000 in interest on an overdraft of £20.1 million in the year to March 2007, and last year's overdraft will have been greater.

No wonder ATIPAC wanted a levy to cut the overdraft and replenish a fund that has been in debt for more than decade.

But what a shame ministers waited for the industry to be on the cusp of an economic crisis to act - leaving us to hope the replacement scheme is up to the rigorous testing it is likely to undergo over the coming months.

First Australian-owned Stella Travel Services was jilted at the altar by Worldchoice. Now it has failed even to get up the aisle with Advantage Travel Centres.

What is an Australian group to do with these fickle UK agency consortia?

Advantage has refused to confirm courtship was even in the air, let alone called off this week. But the sighs - sorry, signs - have been unmistakeable.

Without wanting to be brutal and reduce a relationship to economics, there were sound reasons for the pair to get together - yet possibly sounder ones for not doing.

The charges of price fixing levelled against four past and present executives of British Airways by the Office of Fair Trading are bad news for them and pretty bad news for the airline.

It is bad news for the individuals because they could go to jail - lawyers say for up to five years. The OFT appears keen to make an example of senior company figures following a spate of high-profile investigations into alleged cartels across a series of industries - tobacco, construction, supermarket retailing.

Of course, being charged is not the same as being found guilty. It provides an opportunity to establish innocence. But there is a sizeable risk. Careers and personal lives are on the line as well as liberty.

It is bad news for the airline because mud sticks and because the current head of sales is among those charged, not just those who left in the immediate aftermath of exposure. It is bad news because a line that had been drawn under the affair has been erased.

BA boss Willie Walsh acted swiftly when the collusion with Virgin Atlantic on fuel surcharges first became public. The carrier admitted the offence and paid its fines - totalling £270 million here and in the US - while maintaining a thinly veiled hostility towards Virgin for spilling the beans.

The collusion, between 2004 and February 2006, began before Walsh's time. But he was shadowing outgoing chief executive Rod Eddington from May 2005 and took over as head in September that year. The acts of collusion only ended five months later and were made public in June 2006 after Virgin went to the OFT.

Ryanair's capacity to antagonise is as remarkable as its love of publicity. Small wonder the two came together so beautifully in the "we'll-turn-passengers-away at-check-in" story taken up by the media at the weekend.

The first thing to be aware of is that this is the silly season, so even stories that are not of the "Freddie Star ate my UFO" variety can take up more column inches than they might otherwise deserve.

However, the facts here appear straightforward. Ryanair insists it can, will and has cancelled passengers' bookings made through screen-scraping websites - including sites the BBC identified as "internet travel agents".

This could affect up to 1,000 passengers a day across Europe - Ryanair admits that. We can guess how those affected feel about it. If I was among them I certainly would not conclude that next time a direct booking with Ryanair was the way to go.

Strangely, on Tuesday a Ryanair spokeswoman told me no passenger had, in fact, been turned back from check in. However, the following day a different spokeswoman refused to confirm this, insisting only: "Cancellations have been made. Cancellations have been made."

Can British Airways finally achieve its aim of merging transatlantic operations with the world's biggest carrier, American Airlines?

The joint business agreement between BA, American and Iberia will require anti-trust immunity and Virgin Atlantic wasted no time in firing the first shots against. In fact, it fired a volley - with letters to the leading US presidential hopefuls and almost daily press releases. Given the carriers' previous, this could be a fight fit for Madison Square Garden.

Richard Branson labelled the proposed alliance "a monster monopoly" that would cut competition and push up fares. BA's Willie Walsh would expect nothing less. Naturally, Virgin fears being squeezed. But if Branson is right, the regulators could be expected to give the proposal short shrift.

BA has been here before - although not with Iberia in tow - in 1997 and 2001. The second of these applications would have succeeded if the pair had been prepared to give up 16 daily departures at Heathrow. BA balked at that and probably would do so again.

There is no reason to suppose the competition regulators will rule out the partnership this time - the question will be the price.

Walsh believes the situation has changed enough for him to win this time or he would not have applied for immunity. He has already said a third failure would rule out a further application.

So what has changed?

The law of unintended consequences could kick in if the Competition Commission sticks with its preliminary conclusion and orders a break up of BAA next March.

The Financial Times quotes analyst Paul Hickman of KBC Peel Hunt suggesting a sell off of Gatwick, Stansted and Glasgow or Edinburgh airports could adversely affect the Restaurant Group - the company behind the Garfunkel's and Chiquito eating chains.

The group runs 44 airport concessions, 30 at BAA terminals. The FT points out new airport owners might bring in other companies to run these. Heaven forbid.

"The implications are not positive for the Restaurant Group, which has built up its concessions business largely on its relationship with BAA," says Hickman.

Depending on your view of Garfunkel's food this might be a reason to insist the airport operator divest.

However, there is a contrary view that may yet belatedly enhance BAA's reputation - and it comes from Restaurant Group chief executive Andrew Page.

He says: "BAA limits how much exposure a retailer can have in its airports, while other airport operators do not." So a sell off will not faze Garfunkel's and Chiquito. "We see this more as an opportunity than a threat," says Page.

Surely this is grounds enough to call off the Competition Commission and uphold BAA's monopoly?