The UK government has (finally) agreed to underwrite refund credit notes offered if packages are cancelled as a result of COVID-19.

The change, which will apply to package holidays including a flight, will mean passengers who accept refund credit notes for holidays which are cancelled as a result of COVID-19 will be protected by the ATOL scheme if necessary, even if the company they have booked with subsequently collapses.

The government hopes that this will provide confidence to holidaymakers that their refund credit notes are protected if they choose them over refunds, and so encourage the travel sector’s recovery from the pandemic by accepting a refund credit note. The European Commission suggested such a move to EU member states in May.

The ATOL fund is run by the UK Civil Aviation Authority, and requires travel operators to pay a fee of £2.50 to protect each passenger booking in cases of insolvency. The money, which is held in a fund managed by the Air Travel Trust, is used to refund, repatriate or reimburse travellers for the cost of repaying for the affected parts of their trip. Before this change, ATOL protection only protected customers against the insolvency of the holiday company occurring before or during their holiday.

It is important to stress that customers are still entitled to a refund under the Package Travel Regulations 2018. Therefore, they will be able to ask for this and travel businesses should be careful not to imply that the only option available to consumers is a credit note. Misleading consumers about their legal rights is an unfair commercial practice contrary to the Consumer Protection from Unfair Trading Regulations 2008. However, the fact that refund credit notes are now underwritten may encourage some consumers to take the credit notes and use them to rebook holidays for a later dater if they are happy to use the same tour operator.

Sadly, those with flight-only bookings are not covered, and Which? reports 14,000 complaints in just under six weeks from passengers struggling to get refunds for cancelled flights. It has passed on the complaints to the CAA but it seems like this saga will continue to run.