What Did The Government Know About Low Cost?

The Balearic government has finally made an official statement about the Low Cost Travel Group. Biel Barceló's appearance before parliament's tourism committee came two and a half weeks after the online travel agency collapsed. This was an appearance greeted with self-congratulation. PSOE's Isabel Oliver praised Barceló for "volunteering" to appear, in contrast to how ministers with the previous government would not. Barceló himself said that Abta had congratulated the government for its handling of the affair. Maybe Abta has done, but why did it take so long for there to be an official statement? Since the collapse there have been different messages emanating from the government, not all of them coherent. Its consumer affairs department said hotels could not demand payment from Low Cost customers, yet the government's website is still offering advice about claiming on credit cards or from the government if a second payment has been demanded, which it has been in most instances.

Barceló's reference to "speculation" by Low Cost was presumably a reference to trading that was going on right up to the last minute. He had said the same thing before he went before parliament, so nothing new there. Perhaps the only thing of real note to emerge from his appearance was what he had to say about employees at the ParcBit office having believed that it might be closed but had not suspected that the company would go under.

The "speculation", if one is to believe Low Cost's CEO Paul Evans, was because there was hope that a buyer would come forward. In the only interview he has given - with the UK's "Travel Weekly" - Evans made this claim. As revealingly, Evans suggested that the move to Palma may well have been a mistake. He was sure that it was a "contributory factor" in creating an adverse effect on trading. The loss of Atol and Abta coverage in the UK was therefore harmful.

A government cannot and should not attempt to micro-manage businesses, but there are questions about the government's role in the Low Cost affair that are simply not being addressed. The tourism ministry was in effect the regulator, the guarantor. Why was it seemingly so unaware of issues with the company? Why was the bond lodged with the government reduced from two million to 1.24 million? Why was a bond of that size lodged at all, when it was vastly in excess of what Balearic tourism law requires? Was it voluntary, as Evans says it was, or had it been insisted upon by the previous government? In either case, was this a recognition of the inherent risks of the Low Cost operation?

It wasn't of course only employees who had concerns. Several hotel chains have stepped forward to say that they had stopped working with Low Cost because it was a bad payer. This wasn't recent, it goes back to the time when Low Cost moved to Palma. Was the government, both current and previous, aware of this? If not, why not? It was the regulator. Was there, therefore, evidence of cash flow problems as well as high debts dating back some considerable time which the government chose to ignore or knew nothing of?

David Abril of Més suggests that the collapse of Low Cost will not be the last of its kind in the Balearics. If this is the case, then which other operators is he referring to and what monitoring is the government undertaking?

Rather than congratulating itself, the government should be taking a long, hard look at itself, and that's even before we move on to the question of redundancy payments, over which the government has no control. All it can do is to say that it is "insisting" on the procedure being started.