Abta pays out up to £3 million following failures of fraudulent agents each year, i.e. travel agents that took money from consumers without immediately booking the holiday with the relevant tour operator, airline or hotelier. When the agencies went bankrupt, the consumer was left without a holiday, but refunded in full by Abta. The organisation says it can no longer afford to do this.

Abta agents that have been reported to have traded fraudulently in recent years include London-based Fullness Travel, which also traded as Albion Travel, and Travel Solutions, which was based in Cambridge. In one instance a couple paid more than £4,000 to Travel Solutions for a holiday in Canada and were told to collect the tickets at Heathrow airport, but when they arrived at the airport there had been no booking made. When they contacted the agency, it paid for the airline tickets, but when the couple arrived in Canada there was no accommodation or onward transport booked. Under the new practice, the couple would not have been compensated by Abta had the components of their holiday been purchased separately (see Q&A), but if it was bought as a package holiday they would have been compensated and still would if a similar case arose today.

Spokeswoman Frances Tuke told Times Online: “Another problem with us paying out this compensation is that because we were reimbursing consumers, the police were not following up these frauds. We hope now the police will take it more seriously.”

As well as reducing its cost base, Abta is hoping to boost its fortunes by opening membership to the new players in the travel industry such as Lastminute.com and Expedia. But these are the companies that have been behind the falling fortunes of high street travel agencies in the UK as consumers book their holidays online (in 2005 alone 39 Abta members went bust, a sharp increase from around 30 failures per year since 2000).

In addition, membership of Abta has plummeted from 2,200 travel companies in 1999 to the current figure of 1,687. The organisation has also been plagued by incidents of fraud, not only among its members but also from within its own ranks – in 1994 legal chief Riccardo Nardi, whose job it was to spearhead Abta’s anti-fraud drive, agreed to pay £1 million to Abta following multiple allegations of fraud.

“These changes are all to do with modernising Abta because membership has decreased and due to pressure from no-frills airlines and the internet. So we’re bringing in changes to reduce our cost base and open the doors wider to let the big boys join,” Tuke said.

Previously “big boys” like Lastminute.com, which continues to operate at a loss, would not be eligible for Abta membership because it didn’t meet the financial requirements set out by the organisation.

Despite loosening some of its stiff financial criteria Abta says it will uphold high standards of trading among its members under its code of conduct and remaining financial requirements.

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