The Weekly Roundup: the Continuing Impact of Covid-19 on the Travel Industry



As consumer confidence in the travel industry continues to freefall, and with no apparent end to the Refund Saga in sight, we at 1 Chancery Lane have been wondering how would-be travellers are likely to try and enforce their consumer rights. Many thanks are due to Paul McClorry, of Hudgell Solicitors, who drew to our attention the case of the lady in Witney, West Oxfordshire, who is threatening to go and sit in her local travel agent’s window wearing a swimsuit if she does not get her refund. Her local paper reports that she ‘will go into the store with cocktails and a CD player, wearing a sombrero and flip flops’, which seems to us to take Alternative Dispute Resolution to another level.


Holiday Refunds: Claims under s.75 of the Consumer Credit Act 1974

The right to cash reimbursement within 7 days

Readers will recall that EU Regulation 261/2004 grants consumers the right to reimbursement in cash within seven days of a flight cancellation. Airlines may only reimburse by way of vouchers, instead of cash, “with the signed agreement of the passenger”. Despite this unambiguous right, however, airlines are now, almost without exception, engaging in a unsophisticated but nevertheless effective strategy of “computer says no”.

Consumers visiting Ryanair’s website, for example, are met with the excuse that “Refunds are taking far longer than normal as we are processing over 1,000 times the normal volume of cancellations. We also have 75% fewer staff available to process refunds due to social distancing regulations.” In contrast to labour-intensive cash refunds, the website states that “Ryanair is offering vouchers and free moves as these are automated and give customers an immediate alternative. Unfortunately, cash refunds cannot be automated”. Other airlines are also making it extremely difficult to obtain cash compensation.

There is no explanation as to why the offer of vouchers can be automated whilst cash refunds, ordinarily by bank transfer, cannot be automated. It appears likely that airlines are simply playing for time, on the credit of consumers. Michael O’Leary has built Europe’s most successful airline on the back of its unorthodox treatment of consumers, and it appears that other airlines are starting to learn from the master in this regard.

Whilst there can be no doubting the clear breach of consumer rights involved in these airlines’ strategies, the airlines rightly calculate that most consumers will be put off by the cost and effort of issuing small claims proceedings for flights costing (on average) a few hundred pounds.

S.75 of the Consumer Credit Act 1974: holidays purchased on credit cards

In the context of this airline recalcitrance, consumers are therefore looking at less obstinate sources of cash reimbursement. One such source might be the credit card provider where the holiday was purchased by credit card: by virtue of s.75 of the Consumer Credit Act 1974, a creditor is jointly and severally liable for breaches of contract of the supplier in ‘debtor-creditor-supplier’ agreements. In layman’s terms, in cases of cancelled flights paid for with a credit card a consumer may be able to claim against their card provider rather than their airline/travel company. To be eligible for this route, the purchase value must fall between £100 and £30,000.

There are certain advantages to claiming under s.75 over, for instance, asking for a chargeback (in relation to which, see below):

  • A claim under s.75 allows a consumer to claim for the full value of the flights/holiday even where only part of the payment (so long as above £100) was made on a credit card. This means that even if some of the purchase was covered by vouchers, cash, points, or air-miles the full value is recoverable. In contrast, under chargeback only the amount paid for using the card is recoverable.
  • A claim can be brought up to six years (normal breach of contract limitation) after the card transaction. Under chargeback the limit for bringing a claim is typically 120 days after the payment, which is of little assistance to consumers who paid for their holidays more than four months in advance.
  • A claim is made against a credit card provider, who then seeks indemnity from the supplier. This means that a consumer will still be able to recoup money even in the unfortunate scenario that the airline or travel company has gone into administration or been liquidated as a result of the coronavirus crisis.
  • The liability of the credit card provider is the law. As a consequence, in the event that the provider disputes or rejects the s.75 claim, the consumer can pursue their claim before the courts. Chargeback, on the other hand, is a discretionary scheme, and a consumer’s only avenue of redress is via the Financial Ombudsman and not the court system.

Save in cases of airline insolvency, there may be little advantage in commencing litigation under s.75 rather than bringing a direct claim against the relevant airline, but consumers may reasonably hope that credit card companies’ customer service departments will prove more responsive to pre-action correspondence.

About the authors

Called in 2011, prior to pupillage Conor Kennedy spent two years working with a leading insurance law firm, gaining experience across regulatory, employment, leisure, travel and public sector teams. He has a varied civil practice and is accredited for Direct Access instruction, but has a particular interest and expertise in claims involving fundamental dishonesty.

Tom Yarrow is chambers’ latest acquisition, having been called in 2018. Before joining chambers Tom was a civil servant working in various government departments, including as a policy advisor on the UK-EU Withdrawal Agreement at the Department for Exiting the European Union. During pupillage he worked with the Government Legal Department, practising in public law in the fields of public international law, justice and security, human rights and immigration. He has regularly appeared in judicial review proceedings for the Secretary of State for the Home Department, and as a member of the Attorney General’s ‘junior junior’ scheme, he is able to take instructions directly from government clients. He now practises in all of chambers’ practice areas and is an enthusiastic and valued member of the travel team.


Holiday Refunds: Chargeback Claims

Much has been written about holiday companies that looked “too big to fail” – but with the demise of Thomas Cook, and seeing Norwegian Air now in bailout talks, one cannot be too careful. So far not much attention has been paid to an under-used weapon in the consumer’s arsenal: the “chargeback”, which unlike a claim under s.75 can be used where the goods or services in question were purchased with either a debit card or a credit card. Essentially, the chargeback is a mechanism for the card issuer to claim a refund from the retailer on behalf of the consumer, in circumstances in which either there has been a total failure of consideration (as in the case of a cancelled holiday) or the goods or services provided are defective.

The chargeback is not a legal right, but a mechanism governed by rules set out by American Express, MasterCard or Visa. It is, effectively, a service provided by the card issuer, which essentially steps into the shoes of the consumer in order to make a claim against the retailer, which may or may not respond.

This isn’t as straightforward or simple as it might appear – the card issuer can decide not to process the chargeback, and there’s no legal obligation on them to do so. So if the consumer is met with stony silence, there doesn’t seem to be a way to enforce his or her rights, and of course, even if the claim is processed, the retailer could ignore it or object to it, but there have been successes in the past, and it may be that tour operators and airlines will be more prepared to deal with card issuers than individual consumers. If as a consumer you are stuck with an online travel agent that isn’t taking your call, a chargeback is worth trying.

About the authors

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade.

Francesca O’Neill was called in 2012. She has a particular interest and expertise in Inquests. In 2017 she won the Lawyer Monthly ‘Women in Law’ award for her outstanding contribution in the personal injury field.

…and finally…

Much has been written, not least by the team at 1 Chancery Lane, about the plight of would-be holidaymakers who are now unable to travel. But spare a thought for those who are on enforced cruises. I refer of course to the estimated 100,000 crew members said to be stranded on at least 50 cruise vessels now unable to put into port. There have been cases of Covid-19 on some of the vessels, and these have now implemented quarantine measures, effectively confining crew to their cabins unless it is necessary for them to leave in order to undertake their duties. The vessels have medical facilities, of course, but they are not equipped to deal with cases of Covid-19; in more normal times, a patient requiring ventilation, for example, would be evacuated to the nearest land-based hospital for specialist treatment. The medical teams on board are not specialists, and they are working without the facilities required to treat any number of crew members who may fall ill.

Quite naturally in the circumstances, crew wish to return home; but as the Scottish proverb has it, if wishes were horses, beggars would ride. If wishes were flights, no doubt all crew would be safely home; but they are not, and the cruise operators find themselves in a bind. Many ports are refusing to accept vessels which have had identified cases of Covid-19 on board, and some nations, including the US, have refused to provide even basic emergency assistance to the stranded crew. When one reflects that as at the beginning of April the US Coastguard estimated that over 90,000 crew remained on ships in US waters, the magnitude of the problem becomes clear. If the vessel cannot put into port, how can the crew disembark? Even if they do leave the ship, worldwide travel bans and restrictions will make returning to their home nations something of an Odyssey. India, for example, has sealed her borders, even to Indian nationals; even if an Indian crew member could be evacuated from his ship, where would he go, with nations such as the US and Australia turning vessels away?

The Athens Convention is of no application here, of course, because the crew are on the vessels pursuant to employment contracts and not contracts of carriage; but the situation raises some interesting questions around jurisdiction, applicable law, employer’s liability, and the responsibility of the international community of nations to people who have, effectively, been rendered stateless by the current pandemic. Those questions will be answered (or at least asked more fully) in a subsequent Briefing; in the meantime, it is to be hoped that an answer to the conundrum can be found and the crew repatriated sooner rather than later.

About the author

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade.


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