Opinion: Primera Air collapse exposes passenger protection lack
This article was written by James Kim, Group Managing Director at AvCon Worldwide (Holdings) and first published on LinkedIn, available here.
Primera Air has gone under and it left many passengers stranded overseas. They have to purchase tickets to return home. Most of the passengers bought their Primera Air tickets from Primera Air's website.
Primera Air expanded into the transatlantic market fast and for that it had ACMI, wet-leased aircraft, which cost a lot. It also had no backup aircraft available for AOG or cancellation cases. It had seven aircraft of its own in operation. A number of routes it operated are impossible to cover with seven aircraft - not only transatlantic routes, but also European ones. ACMI operations for LCC are very expensive and should be avoided, except for AOG case for airline reliability.
Primera Air asked passengers of cancelled flights to pay for flights back home themselves and claim Primera Air for a refund. These passengers have to claim three compensation/refund cases. First, under the EU regulation, compensation for cancellation has to be claimed. Then, a refund of cancelled flight fare and taxes. Finally, fares of alternative flights paid by the passengers.
There have been many passengers waiting for refunds of alternative flights. The fares of their last minute bookings, therefore, were higher than what they could have paid flying with another long-haul LCC - Norwegian. Primera could have avoided claims for these last minute booking fares if it made interline, SPA, endorsement deals with other carriers operating same destinations. It could have arranged passenger carriage at agreed fares. This could have helped to save a lot of cash on refund claims.
Now passengers who have not received all three compensations and refunds yet, lost all three claims. The only possible refunds for cancelled flights are if they were paid for by credit cards, but not debit cards. There have been claims by Primera Air passengers that they have not received alternative flight fare refunds for months. That was a sign of Primera Air's financial conditions. Pure cash refund cases of high value, mostly higher than return fares paid by passengers of cancelled flights - was a clear sign of the airline’s financial distress. It is unbelievable that Primera Air kept announcing new destinations, nearly until the closure of its operations.
There should be more protection for passengers. Some have lost thousands of dollars on alternative flight fares, but Primera Air has gone under without refunding these fares. The governments should consider ways to protect passengers in cases of carrier collapse. Mandatory compensation fund or insurance should be in place. The alternative solution could be scheduled carrier failure insurance, which covers losses caused by scheduled carriers' failure. It is recommended that passengers take out scheduled carrier failure insurance during booking process or make it mandatory and make it a part of fares, fees, charges, taxes. Monarch Airlines collapse was handled without much trouble because it was ATOL protected in the UK. Low-cost airlines are not covered by ATOL in the UK as LCCs do not sell holiday packages and passengers buy only flight tickets from LCC's websites. Regulatory authorities should consider ways to protect those passengers in the event of airline collapse.
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