The story broken here on 2 December about Air Australia losing its insolvency insurance cover is well and truly in the broader media today and consumers need very clear or very direct statements from the airline and Flight Centre, the travel retailer associated with Cover More Insurance, as to what is going on.

Flight Centre agents, and other retailers, are said to be asking potential buyers of Air Australia fares as part of their holiday arrangements to Thailand or Hawaii to sign product disclosure statements acknowledging that they do so knowing that the retailer’s insolvency insurance cover for the airline has been withdrawn or doesn’t apply.

That is a serious sales killer when it comes to sealing a purchase for a product that one of the most respected brands in travel retailing has otherwise seen fit to offer alongside a range of airline/holiday products from larger better known brands.

If Flight Centre has any doubts it is hard to understand why it has been offering the Air Australia product for weeks, and apparently, with great success.

Similarly, it may or may not be a situation in which the buyer then assumes all the risk that Cover More, associated with Flight Centre, declines to cover. That risk, whether the customers knows about it or not, may still have to carried by the retailer, and Flight Centre and Air Australia both need to make it crystal clear what happens to the customer’s money if the airline was to go out of business before the product is used.

Doubt in these matters can be near lethal to a new competitive offering in air travel.

It would be fair to say Air Australia faces challenges in launching itself on the market.  However it has also chosen areas where the competition doesn’t offer matching air access or similar value.  If Air Australia is working to a viable business model it has to be a good thing for consumers, and travel retailers, whom it now offers up to 7% in commission.

The withdrawal of insolvency insurance appears to be linked to the airline’s reluctance to email commercial-in-confidence details to the insurer or its underwriter.

Air Australia and Flight Centre are supposed to be in ‘discussions’ today aimed at resolving the issues.  Whatever comes out of this needs to be relayed to consumers in the clearest of terms.