Taxpayers could contribute up to €5 million next year to help compensate holidaymakers hit by travel agent failures, it has emerged.
Government cash is supporting the Travellers’ Protection Fund, used by the Commission for Aviation Regulation (CAR) to compensate customers of insolvent holiday firms, when the companies’ insurance does not cover the cost.
The Department of Transport confirmed at the weekend that it will set aside €5 million in 2022 to cover claims on the fund if the cash is needed.
This money is part of the department’s overall Budget allocation from the exchequer, which is turn funded by taxes on workers and businesses.
The department will return any cash not called on by the Travellers’ Protection Fund to the exchequer at the end of the year.
All the €1.8 million in the fund at the moment comes from the Department of Transport, according to the CAR.
This year’s allocation totalled €10 million, but the commission has not had to resort to using any of that cash to date.
The department provided €1.9 million, from a total contingency fund of €15 million, in 2020, when the fund’s remaining balance was €1.3 million.
Since then the commission has paid out €1.4 million to holiday makers hit by insolvencies, leaving the current balance.
Last week the CAR said it was evaluating claims relating to two holiday company insolvencies, but did not name the businesses involved.
Commission licensing rules require travel agents to put up bonds – a type of insurance – amounting to 4 per cent of turnover, to compensate customers in case of an insolvency. Tour operators must put up bonds equivalent to 10 per cent of turnover.
Where a company goes out of business and the bond is not enough to compensate its customers, the regulator uses the Travellers’ Protection Fund to make up the difference.
EU law obliges the Government to ensure that there is enough cash in this fund to cover compensation for customers when travel companies fail.
The Department of Transport sets aside cash every year in case it is needed to top up the fund.
The commission and department plan to restart a review of both the holiday companies’ bonding scheme and Travellers’ Protection Fund next year.
Covid-19’s outbreak in early 2020 forced them to suspend the review, based on proposals the commission had submitted to Government in late 2019.
One proposal was to seek a once-off payment from travel agents and tour operators to top up the Travellers’ Protection Fund.
The State had not sought a direct contribution from the industry to the fund since the 1980s.
The fund reached a peak of €7.5 million 2007-2008, but subsequent payouts depleted this to €1.8 million by 2017, prompting the commission’s review of both schemes.