Low Cost Holidays customers 'may only get negligible sum in compensation'

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Customers of Low Cost Holidays could receive just a few pounds in compensation after the firm went into administration, the administrator has reportedly warned.

The budget tour operator blamed "the recent and ongoing turbulent financial environment" when it went into administration late last week, leaving 27,000 customers abroad, and 110,000 with future bookings.

It was not registered with the UK Government-backed Atol scheme, which would have compensated them in full.

Instead, it has a bond in place for 1.3 million euro (£1.09 million) - enough to pay out a few pounds to each customer, Smith & Williamson, which has been appointed as administrator, told The Times.

Finbarr O'Connell, of Smith & Williamson, told the newspaper: "There is a bond in place but for the very limited sum of Euros 1.3 million. The potential claims from customers are expected to be very substantial and could be more than £50 million.

"There are about 140,000 customers we believe have lost out. Sadly this means there will be very little back for any claim.

"The compensation will be paid to claimants on a pooled basis so everyone would get back the negligible sum of about one or two per cent."

Smith & Williamson said in a statement that there were approximately 27,000 customers currently at resorts and 110,000 who had booked trips but were yet to set off, with about 55% of the group's customers being British.

The Civil Aviation Authority (CAA) said the company was based in Majorca and was registered with the Balearic Islands authorities, and therefore not part of the UK's Atol scheme.

The CAA said in a statement: "We believe the company may have had a large number of British customers and many of these are likely to be overseas.

"Our understanding is these customers should have valid flight tickets to use to return home to the UK. We advise customers to check the status of their bookings with their airline and accommodation provider. More information is available from the company's website."

A message on the Low Cost Holidays website on Friday night said: "We deeply regret to announce that the lowcosttravelgroup ceased to trade on 15 July 2016, following exhaustive attempts by the group's directors to rescue the group, which has been hampered by the recent and ongoing turbulent financial environment."

The operator told holidaymakers via its website that their flights home would still be valid, but warned that hotel owners, as well as companies offering services such as airport transfers, may ask them to settle their bills before leaving.

It advises customers to claim for any extra payments that they are asked to make from their travel insurer, credit card company or the government of the Balearic Islands.

Lowcosttravelgroup was founded in 2004 by Paul Evans, a travel industry executive who started out as a resort manager for Club 18-30.