Some one hundred staff have lost their jobs in Palma because of the collapse of Low Cost. | D.P.


The Balearic government, under pressure to sort out claims for compensation from holidaymakers who are victims of the collapse of Low Cost Holidays, has explained that the bond the online travel agency deposited with it was originally two million euros. It was subsequently reduced to 1.24 million, the figure that has been widely reported.

The government hasn't explained why there was this reduction but has said that the bond was a voluntary payment insofar as it was well above what is required under Balearic tourism law. There are three different categories of travel business in this law, with the highest bond required being 180,000 euros. The text of the law does refer to specific protection for packages (flight, transfer, accommodation).

Even though this bond was as high as it was, it was still well under the total cost of protection that would have been required in the UK, especially once the amount was reduced.

There have so far been around 1350 claims made to the government. If these are from final clients, i.e. holidaymakers, the bond should be used to satisfy claims, so long as they are for package bookings. Businesses will have to follow a different procedure in making claims, as the bond was intended for final client protection, and so file claims with the administrators, Smith Williamson, against Low Cost's UK division.

Meanwhile, there is more evidence that Balearic hotel chains stopped working with Low Cost because it was considered to be a bad payer. Juan Riera, the president of the hoteliers federation for Ibiza and Formentera, has said that the majority of hoteliers on those islands had cut their relationships with Low Cost three years ago.

There are also questions being asked about Paul Evans, the founder of Low Cost and someone once described as a "holiday guru". Specifically, where is he? Nothing has been heard of him since the announcement that Low Cost was to cease trading was made last Friday. And the Balearic government is having questions asked of its handling of the affair, such as what it is doing with the bond money and whether it, effectively the regulator, was aware that Low Cost was experiencing difficulties, of which many in the local travel industry were aware or at least suspected.