Crunch Time – how safe are your holiday plans?

Monday 27 October 2008

I am sick of hearing about all this Credit Crunch stuff.  Global finance should be taught at Hogwarts as part of the Dark Arts curriculum and having worked in various investment banks, I can confidently say that none of them know what is going on. 

But given the state of the market, you know that already.  The finance industry is, in my opinion, an elaborate set of smoke, mirrors and secret trapdoors where the role of conjuror and audience overlaps and as such we find ourselves in today’s situation: chaos. 

My plan for a solution is for the press to stop reporting on it, everyone ignore it and carry on the same as usual.  It is the same principal as shouting “Fire!” in a stadium with one exit – people are going to get trampled in the panic to get out.  It’s much better to put the fire out and for no one to be told about it in the first place.

Despite my feelings on the matter, I nevertheless feel duty bound (I was asked) to write a small missive regarding the travel industry and this little “thing” which is happening and how we’re all affected by it.

Q. How is the travel industry being affected by the present market?

A: Skyscanner’s news pages recently ran an article quoting David Else from Lonely Planet who said:

“The actual number of people travelling the world or taking a holiday has not been impacted much by the credit crunch." 

Another article suggests the same as Dermot Blastland of TUI Travel explains that:

"Neither First Choice or Thomson have seen any evidence of deteriorating customer sentiment in booking patterns or the average holiday duration booked; in fact, over half of our customers agree that even if they had to cut back on spending, their main holiday abroad would be the last thing they would give up." 

Certainly research suggests that people prioritise a holiday very highly in their spending hierarchy so children all over the world should expect no Christmas presents.

Q: Who is likely to go bust next?

A: The bookmakers Paddy Power rather cheekily offered odds a few weeks ago on which airlines would go bust in the next little while.  One particular airline apparently took exception to this and legal mutterings were exchanged so those particular odds have been removed. 

The good news was that the big British carriers (BA, Ryanair and EasyJet) were offered at odds of 100-1.  To put these figures in context, you would get the same odds if you bet that the England football team would beat Kazakhstan 6-5.  Or if you bet on Kazakhstan winning 2-1 – which I did.

Q. Am I covered by my travel insurance if I have bought flights directly from the airline and it goes bust?

A: Bad news here – probably not.  Most travel insurance policies do not cover airline bankruptcy so you will be left high (though in a different way) and dry.  Swiftcover, The Post Office and Karma insurance are the only insurers I found who are covering customers who have been unlucky enough to choose a carrier which goes belly up.

Q: Is there anything I can do with my existing policy then?

A: Good news this time.  InsureFor, an online insurance provider offers a separate policy from just £4 that you can add on to your existing policy to protect against so-called Supplier Failure Cover. 

In the event of your airline going bankrupt, you will be covered for up to £5000 per person.  It is not a substitute for comprehensive insurance but is a small price to pay for peace of mind in these uncertain times.  There is a £50 excess so if you are on a budget flight, it might make economic sense just to take the hit.

Q: Do credit card purchases cover me?

A: Yes and no.  If your ticket cost more than £100 then yes, the credit card company is jointly liable for the flight.  The trouble is though, that many budget flights cost less than this, so once again, you may not be able to get your money back.

Q. And package holidays?  

A: If you book your holiday through a travel agent, they are covered by the Air Travel Organisers’ Licensing (ATOL) scheme which provides financial protection for tour operators in the UK.

Q. Are costs likely to carry on increasing?

A: At the moment, who can say?  The investment analysts are split as to which way oil prices will go – the factor which dictates fuel costs for the airlines.  Goldman Sachs analysts for example currently predict crude to average $110 a barrel in 2009 with others predicting a $70-80 range.  Volatility is the key word here and no one knows which way the global bail-outs for the financial services industry are going to go.

Conclusions

As a consumer, if you are sensible and take insurance precautions you are going to be safe.  You can be covered by cheap additional insurance, your credit card, or ATOL registered travel agents. 

The worst case scenario (depending on your point of view) is that a Ryanair-type carrier goes bust and you lose your £26.99 return ticket to Barcelona.  Yes, it would be annoying, but that kind of loss is not going to cripple someone that can afford to go to Spain in the first place.  

As such, our customers should carry on booking away with peace of mind and according to Skyscanner’s Barry Smith, Chief of Business Development, you have been doing just that, since we’ve seen a 35% rise in visitors in the last twelve months. 

Everyone should get away from all this rubbish, fly somewhere nice and warm and listen to Gordon Brown announce that Skyscanner has saved the world from recession.