Bestjet’s collapse exposes law flaws

Thousands of travellers have been left worse off because consumer protection laws were scrapped several years ago.

Bestjet was a member of Australia Federation of Travel Agents, but in March 2016 it ­became the second company to lose its accreditation. Picture: Annette Dew

Thousands of customers of failed online travel group Bestjet have been left exposed to potential losses worth millions of dollars because longstanding consumer protection laws and travel agent licensing requirements were scrapped by state governments in 2014 in favour of industry self-regulation in the name of cutting red tape.

Until 2014, consumers booking services through travel agents, such as flights and accommodation, were reimbursed by the Travel Compensation Fund if the travel agent they used collapsed or otherwise failed to ­deliver the services paid for.

Following industry lobbying, those state-based consumer protections — in place for four decades in NSW — were removed in unison across Australia and travel agents were no longer required to hold a licence to operate.

The rationale for the change was that by 2012, when most states agreed to the rollback of the laws, more travellers were booking direct with suppliers, such as buying tickets from airlines directly. It was argued travel agents played less of a role than they had traditionally, and that the industry could instead “self-regulate” so as to cut red tape.

Before the laws were repealed, travel agents were required to hold a licence, and to hold a ­licence they were required to be members of the Travel Compensation Fund, which in turn required them to post substantial “security bonds” to protect customers. From mid-2014, the legislation was replaced by an industry accreditation scheme called ATAS, run by the Australia Federation of Travel Agents, which requires members to pay annual fees and to be subject to audits and other checks.

Bestjet was placed in administration on December 18.

The changes have drawn criticism, with consumer advocates warning many customers have been left substantially worse off. Sydney-based litigation experts, ACA Lawyers, have long warned of the flaws associated with the ­industry-led scheme.

“AFTA has no authority to enforce standards against agents that aren’t accredited and under the voluntary scheme there is no requirement for agents to have insolvency insurance to protect consumers,” ACA’s website says.

Membership of ATAS is voluntary, AFTA has no authority to enforce standards against agents who aren’t accredited under the scheme and many consumers are unaware of the scheme’s existence or relevance.

Bestjet was a member of ATAS, but in March 2016 it ­became the second company to lose its accreditation, in part due to concerns Bestjet, whose sole registered director was Rachel James, was in fact being operated by her disgraced businessman husband Michael James.

Bestjet, which claimed to offer customers access to fares from 300 airlines and 300,000 hotels across the globe, removed the reference to its ATAS membership from its website and continued operating.

Mr James was CEO of budget carrier Air Australia until it collapsed in 2012 owing $97 million and leaving hundreds out of work.

Bestjet was founded by Ms James two weeks after Air Australia collapsed — and the day ­before its first creditors’ meeting — causing widespread concerns within the industry and media that Mr James, rather than his wife, was driving the new venture.

In 2013 Mr James was bankrupted and banned by the Australian Securities & Investments Commission from managing companies for three years. Despite Mr James’s ban, the former Air Australia boss has long been suspected of running Bestjet.

Brisbane businessman Robert McVicker, who bought the company just six weeks earlier, told ASIC he had no access to the company’s accounts because they were in the hands of Mr James.

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