flyGlobespan was Scotland’s biggest airline, based in Edinburgh. It employed about 800 staff and carried more than 1.5 million passengers a year on 12000 flights. On its’ collapse, arrangements were made for the repatriation of 1100 passengers stranded abroad. These were passengers that had a flight with flyGlobespan as part of a package travel arrangement and were therefore protected on the airline’s insolvency. There were a further 3400 passengers abroad that were not protected as they had booked directly with the airline on a flight only basis. An additional 27000 consumers that had booked flights as part of a package to take place in the future were also protected but 90000 who had paid for future flight-only arrangements were not. However, many of these latter were protected under the Consumer Credit Act if they paid for their flights using a credit card. This protection does not apply to those who paid with a bank debit card unless the terms and conditions issued by the bank provided otherwise. Likewise, some charge cards, such as American Express, provide protection in certain circumstances. The problem is that some members of the public do not understand the difference, in this context, between a credit card, debit card and a charge card, nor why package travellers are protected and flight-only consumers are not. Many airlines use a different company to handle their credit card bookings and this was the case with flyGlobespan, which used E-Clear. These companies need to insure against claims being made on the default of an airline and this became increasingly expensive during 2008- 9. In order to reduce their risk and, hence, insurance premiums, some tended to withhold payments to the airlines until the flights had already taken place. This was so in the case of E-Clear. The Finance Secretary of the Scottish Government, John Swinney, stated that flyGlobespan was badly let down by the fact that E-Clear, handling bookings on their behalf, had not paid them money that they were due: “That is the inescapable commercial reality of what has been faced here.” Mr Swinney added: “The key issue is about making sure that, in the private market, companies honour their commitments…Here E-Clear have held on to money that should have been passed on the flyGlobespan and as a consequence employees of flyGlobespan and members of the travelling public are now experiencing real difficulties”. The insurance issue might explain why E-Clear was holding on to flyGlobespan’s funds (£14 million) received for flights yet to take place but it doesn’t explain why it was withholding as much as £20m for tickets that had been used – transactions which no longer carried any risk. The Scottish administrators of flyGlobespan have raised a legal action against E-Clear on Monday. It is also understood that the Slovakian airline, SkyEurope has also raised a claim for £13m for funds withheld by E-Clear when it went into liquidation in 2008. Go Travel Direct, based in Canada, has likewise started a claim for £300,000 it says that E-Clear owes them.
