People booking a holiday abroad are set to benefit from a clearer more extensive protection scheme after the government confirmed it would press ahead with reforms to the Air Travel Organisers’ Licensing (ATOL) scheme. The reforms - made necessary by changes in the holiday market - will see the ATOL scheme undergo the biggest overhaul for more than a decade. The changes are expected to ensure around 6 million more holidays receive protection.
In a statement to Parliament, the Aviation Minister, Theresa Villiers, outlined a series of changes to ATOL which the government aims to implement by the end of the year. Subject to a Spring consultation on the details, the reforms will:
- extend protection to include ‘flight plus’ holidays. This would cover trips including a flight where the various elements are purchased within a specified short period - essentially looking like a package holiday but falling outside the existing legal definition.
- deter businesses from misleading consumers about their level of protection. Some companies offer holidays which might look like packages but make the transaction as an “agent for the customer” without explaining to the customer that this means forfeiting ATOL protection. These proposals are designed to provide customers with a clear and honest explanation so they can make informed decisions.
- replace the wide variety of documents which companies currently issue with standardised information for travellers, making it clear when their trip is ATOL protected. Work on this is already underway, with the Civil Aviation Authority and the travel industry developing an easily recognisable certificate for protected holidays.
These reforms will be achieved through new regulations, existing legislation and making greater use of unfair trading rules.
In addition to ensuring the ATOL scheme is better suited to the modern holiday market, the proposals will also help to reduce the deficit in the fund which covers refunds and repatriation in the event of insolvency. Following a number of high-profile collapses in recent years, the Air Travel Trust Fund (ATTF) relies on a Government guarantee, currently worth £42m, and Ministers see the reduction of this as very important.
Theresa Villiers said:
Since it was introduced, ATOL has provided protection for millions of holiday makers and I am determined to see this continue. Insolvencies in recent years have shown us how important it is that customers are able to buy protected holidays, but recent court cases have only served to highlight the fact that the scheme is in need of reform. These changes will remove much of the confusion surrounding ATOL, while ensuring operators who offer such holidays provide customers with the financial protection they expect.
As well as improving protection for passengers, these reforms will help us put ATTF finances back on track so that taxpayers’ exposure to the fund’s deficit is rapidly reduced and ultimately eliminated.
I also believe there may be a case for new primary legislation to address other issues in the ATOL scheme and I will be considering this further in the course of the year.
ATOL is a scheme that protects consumers on package holidays and some flights from the insolvency of their tour operator or travel agent. It is run by the Civil Aviation Authority.In the past 12 months, 43,637 holidaymakers were repatriated under the scheme and a further 132,820 received full refunds when their ATOL tour operator went bust.
Most businesses selling package holidays including a flight have to have an ATOL licence issued by the CAA. Businesses pay £2.50 for each booking into a Fund that meets the costs of refunds and repatriations. The Fund is currently operating at a deficit, and relies on a government guarantee, currently £42 million, to access commercial borrowing facilities to meet its obligations.
The ATOL scheme was first put in place on a statutory basis in the early 1970s. It was last substantially overhauled in 1995.
Airlines are legally exempt from the requirement to hold an ATOL, however any package holidays they sell must still be financially protected. A number of UK airlines have subsequently set up subsidiary companies to sell package holidays that do have an ATOL licence.
Legally, businesses are required to have an ATOL licence if they sell package holidays or certain ‘flight only’ tickets to customers. Some businesses, however, do not technically ‘sell’ the flight element of a holiday, instead they buy it on behalf of the customer, sometimes using the customer’s credit card details. This arrangement, referred to here as ‘agent for the customer’, does not require an ATOL licence. Customers buying a flight and accommodation in this way are not therefore protected by the ATOL scheme, but may be unaware of this.