Travel Republic director Kane Pirie defended his company in court on Friday (October 23, 2009), suggesting its business model was misunderstood by the Civil Aviation Authority (CAA).
Pirie told prosecution counsel at Stratford Magistrates Court: “We are a new business and you do not appear to understand what we do.”
Travel Republic and Pirie are on trial for breach of the ATOL regulations in a prosecution, brought by industry regulator the CAA, that could have far-reaching consequences for a section of the travel trade.
Ian Croxford QC for the prosecution suggested Pirie had decided against applying for an ATOL on commercial grounds.
Pirie told the court: “We looked at the cost of buying our way out of the conflict [with the CAA]. Having looked at the costs, we did not want to take an innovative business and thrust it back into an old-fashioned business. One aspect was financial, another was our business model. The bigger issue was the business model.”
Croxford suggested Travel Republic’s directors had been trying to sell the company as the CAA pursued them to apply for an ATOL and this had led them not to change the business.
He told Pirie: “You appointed [financial advisers] Close Brothers before February 2008. They advised you on a complete or partial exit.”
He suggested the company would have had a value of £50 million to £100 million at the time, which Pirie said was “about right”.
Croxford asked: “At the time XL Airways collapsed you were negotiating for an exit?”
Pirie replied: “We were negotiating with private equity houses.”
Croxford said: “If you had had to change the business model it would have had an impact on negotiations.”
That raised challenges from both defence QCs, who described it as “inappropriate”.
Croxford then said: “By March last year you understood the company and you as a director were at risk of being prosecuted. You knew the risk and you decided to run that risk.”
Earlier, Pirie suggested Travel Republic’s business model had the blessing of ABTA, of which it is a member.
He told the court: “I had several meetings with ABTA, which was always very helpful about how we organised our business.”
Croxford invited Pirie to read an ABTA guidance note on ATOL requirements, suggesting: “It does not offer your company much comfort, does it?”
Under cross examination, Pirie repeatedly insisted: “We sell separate products at separate prices.”
Croxford suggested an offer to one customer, used in evidence, was “a combination of components that made up a holiday”.
Pirie said: “Combination is your word. I see separate products at separate prices.”
The prosecution asked Pirie to examine booking details printed from Travel Republic’s back-office system, pointing out the system described a tailor-made holiday as “linked bookings” of a flight, accommodation, airport parking and transfers, paid for by a single payment.
“Your company recognised this was a linked arrangement,” said Croxford.
“There is linkage between the bookings,” replied Pirie.
Croxford suggested: “This document was part of a device to suggest there were separate bookings, was it not?”
“No,” said Pirie.
Referring to a transfer booking request confirmation listing a flight arrival, departure, named hotel and transfers, Croxford said: “Your company sees these as linked one with the other?”
“That is what a transfer is,” said Pirie.
Croxford then showed the court Travel Republic’s notice to customers following the collapse of XL Leisure and its Freedom Flights and Medlife Hotel brands in September 2008.
He suggested to Pirie: “You publicly recognised the linkage between various travel components.”
“We recognised there was link between products,” said Pirie. “I call them products, you call them components.”
Croxford referred to a series of transcripts of phone bookings in which call-centre agents’ explanations to customers varied.
In one instance, a call-centre worker told a client booking a Travel Republic tailor-made holiday: “We did this as separate transactions all together. We just got all these components together to make a holiday.”
Pirie said the employee had “gone a bit freestyle” and had later been “sacked”.
“But it was entirely accurate,” said Croxford.
A call-centre worker handling another booking said: “Each booking is a separate transaction, we just linked them together to make a tailor-made holiday.”
Pirie said: “Each product is sold separately. We are not trying to dress anything up.”
Croxford went through Travel Republic’s terms and conditions and put it to Pirie: “I am suggesting these terms and conditions are a device. They are not genuine. It is all artifice.”
The case continues.