Email
Password
Remember meForgot password?
    Log in with Twitter

article imageOp-Ed: The scourge of credit as yet another travel company goes bust

By Alexander Baron     Aug 4, 2011 in Business
Yesterday, a major budget airline that specialised in the Turkish market went bust leaving around 12,800 passengers stranded in Turkey. The question has to be asked, how can this happen yet again?
The first point to make is that Holidays4UK (which also traded as Holidays 4U) is/was in no way connected with Holidays4U.Org, as the latter makes clear on its website. This was a big story yesterday morning, not least for the people who turned up at the airport to find their tickets would not be honoured. Sadly, this is nothing new for tour operators, especially those that target what might be termed the bottom end of the market, operating on slim margins, the tour industry equivalent of “stack it high, sell it cheap”. The nearly good news is that the Air Travel Trust Fund was established in the 1970s to protect unwary holidaymakers from being left high and dry, and that each and every one of Holidays4UK’s stranded clientele will get a free ride home.
That being said, and leaving aside the current economic climate, the machinations of the Federal Reserve, the Greek crisis and whatever else rears its ugly head in the next few weeks, something like this should not happen, not to a holiday firm, not to any firm. Then how does it?
Those of a certain vintage may remember a notice that was sometimes displayed in corner shops, public houses, etc. Usually in block letters, it read PLEASE DO NOT ASK FOR CREDIT AS A REFUSAL OFTEN OFFENDS. Or some such.
It is one of life’s not so sweet ironies that credit is one of those things that is most readily obtained by those who need it least. Akin to credit is hire purchase (HP), and of course the really big one, for most people, a mortgage. The expansion and ready availability of credit has been a good thing for the development of the economy, at a global, national and micro-level, but as with every other good thing in life, it comes at a price. While many people “need” to run a car, and while buying a home “on HP” often makes better sense than to rent, there are alternatives, certainly to obtaining a mortgage – as all devout Moslems realise. The business world runs on credit though, literally, and where Joe Sixpack or that nice Christian lady next door would be hard pressed to obtain a dollar credit at the local store where they’ve shopped for the past twenty years, businesses who are not prepared to invoice and then wait patiently will turn over hardly any trade at all, and the bigger the creditor, the slower the invoice will be honoured.
Chasing companies for small sums of money is both time consuming and expensive. A small publisher may supply perhaps one copy of a book to a bookshop, at trade discount. Two months later when the invoice hasn’t been honoured, a chase up letter will be ignored or will result in a blank response – we have no matching invoice, or can you send a duplicate? Nowadays of course this can be done at no expense by e-mail, but companies, including local authorities and government departments, can in effect blackmail their small suppliers with the threat or insinuation of taking their business elsewhere. Though it has to be asked, does any company need business like this? the problem remains a perennial one.
The big question though is, why? Now, in the age of instantaneous money transfer, there is absolutely no need for a company of any size to do business on credit, ie using other people’s money.
The collapse of Holidays4U is in effect an act of theft; the company took the money of over twelve thousand paying customers and gave them nothing in return. Where has all this money gone? If you did that, you wouldn’t have received a phone call from the administrator, you’d have had a white van parked outside your house at 6am, and a knock on the door from two men displaying photo-ID and a search warrant.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
More about Holidays4UK, Holidays4U, Bankruptcy, Insolvency, Credit
More news from
Latest News
Top News