September 15, 2008

An Industry in Crisis: Av Iation Experts Warn of More Collapses 67,000 Still Overseas | BA Says 30 Airlines Will Fold | 200,000 Affected


THE UK package holiday and aviation industry is facing a crisis after Britain's third-largest tour operator became the latest victim of the credit crunch.

Tens of thousands of holidaymakers were stranded around the world as XL Leisure collapsed spectacularly, raising fears that many customers will never see their money again.

XL's shock demise was expected to put the future holiday plans of a further 200,000 people in jeopardy as the travel giant ceased trading .

In Orlando, 266 frustrated British passengers were allowed to board an XL plane only to be told to get off again after the company contacted air control staff to call the aircraft back.

The tour operator was taking bookings hours before it announced it had called in the administrators at 3am yesterday.

Unions representing the majority of the near 2000 workforce expected to lose their jobs attacked firm bosses for "disgraceful" treatment of staff after some were stunned to learn their fate while in the air.

XL's announcement that it was going into administration due to the combined effect of record oil prices and the credit crunch follows days after Scottish package holiday operator Seguro Travel went bust and a fortnight after budget airline Zoom hit the wall.

Last night, BA chief executive Willie Walsh predicted that another 30 airlines would go out of business in the next three to four months, saying: "Some of the airlines that we have become used to will not survive."

Industry analysts agree, saying that the sector now faces a worse crisis than it suffered in the wake of the 9/11 attacks in 2001.

The Air Travel Organisers' Licensing (Atol) body which pays for refunds said that its back-up fund was already GBP21m in the red.

Atol stressed that the debt dated back several years and expressed confidence that a GBP41m bond amassed by XL through Atol would be enough to cover most consumers' claims.

But with more and more British travel firms going into administration and troubled Alitalia closer to going under too as takeover talks stumbled experts are concerned that there will not be enough cash to repay out-of-pocket travellers.

Travel body ABTA called on the UK Government, which guarantees the Atol refund scheme, to extend that financial protection to all customers .

David Kaminski-Morrow of industry bible Flight International, said: "After September 11 it was pretty bad but I don't think it was as bad as it is now. There were a few casualties then . . . but recently there have been more and more and more.

"Airlines are struggling to make profits in peak season. It's not just small dodgy carriers being affected , it's big ones too."

ABTA chief executive, Mark Tanzer, said: "The failure of XL demonstrates the virtue of financial protection, and the hazards of travelling without it. We shall renew our call on government to address urgently."

As the Civil Aviation Authority attempted to repatriate people marooned overseas, Atol said it had introduced a new system earlier this year under which firms paid a GBP1 levy per passenger.

A spokeswoman said that the body expected the levy initiative to be "robust and successful" .

No-one from the UK Government was available to comment.

Originally published by Newsquest Media Group.

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