Written statement to Parliament

Air Travel Organisers' Licensing reform consultation

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Consultation on reforming the air travel organisers' licensing (ATOL) scheme published.

I am pleased to announce that a consultation on reforming the air travel organisers’ licensing (ATOL) scheme is being published today.

Since its inception some 40 years ago, the ATOL scheme has successfully protected many millions of consumers on flight-inclusive package holidays against the insolvency of their travel company. However, the travel trade and holiday market has seen significant change and diversification in recent years. There are now many holidays available which look like packages but do not fall under the legal definition and so are not protected under the ATOL scheme.

There is a strong case for reforming the scheme to better reflect today’s holiday market so that consumers can be clear when their holiday is protected, allowing them to understand and use their legal rights. In addition, the scheme has operated with a deficit for some years and is supported by taxpayers through a government guarantee. The reforms should put the ATOL scheme on the path to financial self-sustainability, with a view to ending the need for taxpayer support.

The consultation document sets out the details of the in principle decisions I announced on 3 February (‘Official Report’ 3 Feb 2011: Column 55WS). These were:

  • extending the ATOL scheme to flight-plus holidays comprising a flight and other component bought within 2 successive days
  • that everyone booking a ATOL protected package holiday or flight-plus will get a recognisable ATOL certificate confirming their rights under the scheme for refunds and repatriation should their travel company fail
  • helping ensure that agent for the consumer businesses arranging holidays are fully aware of their legal responsibilities to consumers

It contains the draft secondary legislation needed to implement the first 2 measures.

This is an important first step towards reforming the ATOL scheme. These reforms will address a major area of uncertainty for consumers when buying holidays from tour operators and travel agents. The additional ATOL Protection Contributions at £2.50 per booking should help the scheme become financially self-sustaining within 3 years.

Importantly, the reforms pave the way for further potential change to the ATOL scheme in the medium to longer term. Once the scheme’s deficit has been paid off and the guarantee withdrawn, there is an opportunity to consider how funding repatriations and refunds might best be arranged in today’s market. The consultation seeks initial views on this, to inform more detailed work to be undertaken by the Civil Aviation Authority later in the year and into 2012.

The consultation also asks stakeholders about bringing holiday sales by airlines and those arranged on an ‘agent for the consumer’ basis into the scheme. These would require new primary legislation. The bill to reform airport economic regulation could provide a vehicle to make the necessary changes if government decides to go ahead with these further reforms. Decisions on reforms needing new primary legislation are planned for the autumn and may also need to take account work underway by the European Commission on the future of the package travel directive.

The consultation closes on 15 September 2011. My aim is to announce decisions in the autumn on the way forward on the reforms dependent on new secondary legislation. Subject to consultation responses, the intention is for the reforms to come into effect on 1 January 2012, so consumers have the benefit of the additional protection from their summer 2012 holidays.

Copies of the consultation document are available from the department’s website.