Be wary of reputation when booking flights

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Tenth in a series of interviews in which specialist travel lawyer Anthony Cordato discusses issues of vital importance to travellers, travel agents and tour operators.

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Be wary of reputation when booking flights

If Benjamin Franklin were alive today he would be fascinated by the travel industry, where airlines, cruise lines and tour operators provide thousands upon thousands of enjoyable travel experiences to travellers, but are ever fearful of one disaster which can destroy their hard-earned reputation.

As Benjamin Franklin put it, “It takes many good deeds to build a good reputation, and only one bad one to lose it.” – (Benjamin Franklin was an, 18th-century American founding father, scientist, philosopher and inventor).

There are two types of disasters that can destroy the reputation of an airline, says Sydney-based specialist travel lawyer Anthony Cordato.

“The first is a financial disaster – where the airline suspends operations because it runs out of cash; the second is a safety disaster – where the airline is grounded by a regulatory authority because of its poor safety record.”

This article examines the airline’s reputation and the responsibility that a travel agent, a package tour operator and a cruise liner owes to their client in booking air travel.

= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Airlines and the global financial crisis

The current global financial crisis will expose many airlines that are financially shaky. According to British Airways CEO Willie Walsh, “unprecedented oil prices, economic slowdown and weaker consumer confidence” are seriously affecting profits. These events are forcing many airlines to cease trading. According to the European Regional Airlines (ERA) Association, 35 airlines have gone belly-up this year, a figure which it sees doubling by year’s end.

Airlines, like people, have reputations – and some airlines are of such dodgy repute that travel agents should steer clear of them.

The duty of the travel agent to choose a financially reputable airline

“Reputable travel agents make air bookings on financially reputable airlines. Travel agents will generally be aware if an airline is financially shaky from the trade press and the popular media.

“The travel agent owes a legal duty to the client to exercise due care and skill in making the travel arrangements, and in my view, it is consistent with that duty to ensure air bookings are made with a financially reputable airline. This does not require a travel agent to have the gift of prophecy, simply that they use their professional skill when booking air travel,” says Cordato, whose legal firm, Cordato Partners, Tourism Lawyers, offers specialist legal advice to travel agents, tour operators and carriers.

But what if the client insists on booking with an airline with a poor reputation, almost certainly because of the cheap fare?

Clients looking for the cheapest airfares will insist that the booking be made on a financially dodgy airline and not the reputable airline recommended by the travel agent. Will this come back to haunt the travel agent if the airline goes belly-up before the flight and the client has to pay for again for a flight?

“There are no reported decisions in Australia as yet, but in the United States, the courts have ordered travel agents to reimburse consumers where the travel agents have booked consumers on airlines which have become insolvent before the flight, on the basis that the travel agents knew or should have known of reports that the financial future of the airlines was uncertain.”

It might come back to haunt the travel agent, unless the travel agent has warned against considering the booking along the lines of “you fly at your own risk” meaning that –

• If the airline goes belly-up before the flight, the fare paid will be lost, and a new fare will need to be paid, probably to a financially reputable airline that should have been booked in the first place.
• Travel insurance cover for cancelled flights or to cover being stranded will not reimburse the lost fare, on account of the exclusion clause found in all policies – The loss will not be covered if due to the financial collapse/default of any transport, tour or accommodation provider.
• The Australian Travel Compensation Fund provides no cover, even though many airlines that fly to Australia are members. Once the consumer’s funds are transferred out of the travel agent’s account to IATA, the money is gone!

“The TCF does not compensate consumers for loss in respect of amounts paid directly to travel principals (airlines, hotels, etc.) for travel, accommodation, etc., to be provided by those principals, in the event that an airline or hotel group should go into liquidation.”

• Although credit card providers exclude responsibility for any supplier’s failure to provide services when paid by credit card, it is possible to obtain a credit from a credit card provider under the Consumer Credit Code. Having said that, to obtain a credit, the payment must be made directly to the airline, and it is unlikely that the credit will be available before the replacement fare needs to be paid.

The warning should be issued in writing – in an email or at the foot of the itinerary – a verbal warning is difficult to prove if contested. It might be along these lines: Your air travel has been booked with the airline you have requested – by making this booking we do not endorse the financial viability of the airline, and if the airline collapses before the flight, you may need to pay another airfare.

The duty of a package tour operator and cruise line to choose a financially reputable airline

Any package tour operator or cruise line that includes air travel in its package takes the responsibility of selecting a financially reputable airline when assembling the package.

That responsibility is one reason why many tour operators and cruise lines steer clear of organising air travel, and leave it to the consumer or the travel agent to book the air travel themselves. You often see the advice in brochures “you are required to make your own air arrangements to the place of departure”.

Assuming air travel is part of the package, in what circumstances can a tour operator or cruise line be responsible for selecting a reputable airline?

A decision helpful to tour operators and cruise lines on this matter of responsibility is detailed in Australian Travel & Tourism Law (4th Ed).

The case, Bridges vs Classic Sports Tours Ltd, was heard in 2004 by the Small Claims Court in British Columbia, Canada.

Facts of the case  Bridges booked a golf holiday package with Pro Team Classic 2001 to be held in Isla Navidad, Mexico. The package included a return airfare, hotel, golf rounds and functions, and all transfers. When Bridges arrived at the airport he was told that the airline, Canada 3000, had entered a creditors’ arrangement, with all its flights grounded. He rebooked the flight to Mexico through another carrier, and claimed the cost of that flight against the tour operator.

Decision - the court (Judge H. Dhillon) gave this analysis:

The Defendant [Classic Sports] did not agree to fly the claimant [Bridges] to Mexico. It contracted on the claimant’s behalf with an air carrier, Canada 3000, for provision of transportation services. There is no evidence that the Defendant did not exercise due care in the selection of Canada 3000 as the carrier. I conclude that at the time the charter booking was made, which was several months before the departure, the Defendant reasonably believed that the airline was a competent contractor. I conclude therefore that the defendant fulfilled its obligations to retain a competent carrier and it is not responsible under contract law for the loss caused to the Claimant due to the grounding of Canada 3000 airplanes. 

Airline Safety

All travel providers promise that safety is their first priority. How successful they are in doing so, is a matter of public record.

While there is very little official scrutiny of the financial status of airlines (unless they are listed on a recognised stock market), Governments around the world are very concerned to ensure airlines fly safely, and must do so under the Chicago Convention on International Civil Aviation, 1944.

In Australia, the Civil Aviation Safety Authority (“CASA”) has the primary responsibility for the ‘maintenance, enhancement and promotion of the safety of civil aviation in Australia’. Airlines must obtain Air Operator’s Certificates (“AOCs”) to operate an air service. The CASA has powerful powers – to audit safety, to suspend and cancel AOCs.

These powers are used. For instance, the Indonesian equivalent of CASA has recently grounded four airlines and given those airlines three months to improve safety standards or face a ban, after a safety audit found they had failed to meet minimum safety standard requirements in several categories.

Not only are there national sanctions, but international sanctions. Currently, the European Commission maintains, on grounds of safety, a ban on all Indonesian airlines flying to European Union countries.

Does a travel agent’s responsibility extend to warning against booking on ‘unsafe’ airlines?

“In my view, the answer would almost certainly be ‘no’ because safety is not something that a travel agent can use their professional skill to form an informed opinion upon from the trade press and the general media. It is the responsibility of the equivalent of CASA in the country to determine safety, by carrying out safety audits, and if needs be, by suspending or cancelling an airline’s AOC. A travel agent should not be held responsible for making a booking on an airline which is then grounded, necessitating the purchase of another airfare.”

How to spot a disreputable supplier

Knowledge within the industry and general knowledge are important for travel agents in making their assessment of the reputations of suppliers and tour operators.

Disreputable suppliers are often known for paying higher commissions, using poor-quality, old and run-down aircraft. They are often known for the large number of complaints made against them.

Note: A travel agent’s responsibility is limited to advice and booking

If the travel agent has chosen reputable airlines and has properly carried out the booking and post-booking responsibilities, then the agent has performed his or her duties, and is not responsible for the actual performance of the travel by the air supplier.

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Anthony Cordato is the author of Australian Travel & Tourism Law (4th Ed) and an expert in travel law. To order his book, visit www.tourismlegal.com.au. His legal firm, Cordato Partners, Business, Property & Tourism Lawyers, offers specialist legal advice to the travel industry and he provides a 15-minute free advisory service which is available by telephone (02) 8297 5600 or by email - ajc@tourismlegal.com.au.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NEXT WEEK: Flying overseas to have your nose straightened, your teeth crowned or to indulge in a little nip-and-tuck cosmetic surgery before relaxing on the beach may seem an odd way to spend a holiday. Yet it’s becoming more popular – and obviously legal ramifications exist. Travel agents dealing in medical tourism should tread with care.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------