Comment: Atol reform progress is step in right direction for consumers and businesses alike

However, Which? director of policy and advocacy Rocio Concha argues opportunities are being missed

The Atol scheme plays a vital role in protecting consumers from financial harm should their holiday provider cease trading, but modernisation of the scheme has been long past due. Reforms are needed to ensure the scheme’s ongoing financial health and its ability to effectively deliver for both businesses and consumers.

It’s therefore been hugely welcome to see the Civil Aviation Authority taking the necessary steps to bring these urgently needed reforms one step closer to fruition, with an interim consultation having just recently closed.

Among the key proposals are the more stringent financial requirements on business including through the separation of holiday prepayments from operational cash accounts. Which? believes this would address some of the issues with the way consumer monies are handled. Which? also appreciates the extra flexibility the CAA is considering offering to business in terms of meeting the financial requirements for an Atol licence.

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While there is much to welcome, Which? is nonetheless concerned that the scope of the proposed reforms is far too narrow, and that a prime opportunity to tackle many of the pressing questions relating to the future of Atol has so far been missed.

Also of significant concern are the weak enforcement powers currently available to the CAA, which prevent it from effectively regulating companies’ compliance with Atol and airline’s compliance with consumer law. At present it can only obtain certain key operational information from businesses via court order, and when wrongdoing does occur, with regards to Atol or indeed other passenger rights,  it has limited tools in its arsenal, and lacks the ability to issue fines. The government must urgently act to give the CAA the powers it needs, as the potential benefit of any reforms to the Atol scheme are likely to be negated if the industry lacks a regulator able to properly enforce the law.

If the regulator and the government are truly committed to ensuring that the UK holiday industry and consumers have robust financial protections in place, it is clear that Atol cannot be looked at in isolation. The glaring absence of an airline insolvency mechanism should be of pressing concern, as at present, flight-only bookings are currently protected only in a very limited range of circumstances. Unless this issue is urgently addressed, reforms to Atol will be no more than a temporary sticking plaster.

Which? firmly believe that reforms to consumer protections should be looked at holistically – and as well as considering the airline insolvency mechanism, Atol should be looked at in tandem with the ongoing review of the Package Travel Regulations (PTRS), to ensure that any reforms maximise consumer protection, and minimise financial risk to travellers.

A Bill to rectify this serious deficiency was promised in the Queen’s Speech of 2019, but almost four years on, no such Bill has yet been brought before parliament. The recent collapse of Flybe is a sombre reminder of the challenges faced by the aviation industry, and the risk posed to businesses and taxpayers when an airline goes out of business. Between 2011 and 2019, 87 airlines became insolvent, impacting 5.6 million passengers across Europe.

In the past, we’ve seen package holiday providers, and even the taxpayer, having to step in to foot the bill and get people home safely when an airline goes bust. The National Audit Office estimates that when Thomas Cook failed in 2019, it cost the government £83 million to repatriate non-Atol-protected passengers, a figure which equates to 55% of the total cost of repatriation. Similarly, repatriation of Monarch’s customers following its insolvency in 2017 cost the government £43 million.  It is therefore essential that the Department for Transport legislates to remedy the current lack of financial protections in place, and the CAA should make this part of its recommendations.

We have previously raised concerns about the looser definition and weaker protections afforded by Linked Travel Arrangements (LTAs) as set out in the PTRs. For example, airlines may be able to sell what appears to be flight-inclusive holiday packages without having an Atol licence and without complying with the obligations afforded to packages. The looser definition of LTAs, and the fact that they are difficult to define, therefore leaves consumers exposed to unnecessary financial risk.

This ongoing review presents a rare opportunity to make lasting reforms that will benefit consumers and businesses for years into the future. It’s essential that that opportunity is not squandered.

MoreSpecial Report: CAA asserts case for change on Atol

CAA clarifies three key points of Atol reform

Analysis: The key points of the CAA’s Atol Reform update

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