Atol reform should be delayed for two years while the sector recovers and be followed by a five-year transition to new financial arrangements, according to the Advantage Travel Partnership.
Advantage criticised the timing of the CAA’s Atol Reform consultation, which ended at the weekend, and insisted there can’t be a rush to segregate funds and increase the costs of consumer financial protection.
Paul Nunn, Advantage operations director, said: “We don’t believe any fundamental changes to Atol should take place in the next two years. Businesses need to rebuild.
“There should be a five-year period for any reform after that, so seven years in all. Businesses need to build up cash reserves and have debts to pay.”
Nunn also insisted the failure of Thomas Cook in 2019 which cleaned out the Air Travel Trust fund should not result in “all Atol holders being penalised”.
He said the CAA should retain alternative means of protecting clients’ money other than segregating funds.
Nunn told Travel Weekly: “We believe in trust accounts, but there has to be choice.
“We run a trust account model. We protect retail sales and we own a captive insurer, so we’re well placed to understand consumer protection. We know the benefits and pitfalls of trusts. One size doesn’t fit all.
“It’s expensive to set up a trust account – there are tens of thousands of pounds to pay annually, to say nothing of the cost of setting one up. And what happens in a failure can potentially be achieved more easily and cheaply through a bond.”
He agreed a move by the CAA to enforce segregation of all customer money could make Advantage Managed Services (AMS), which operates a trust account, more attractive. But he said: “We’re opposed to that.”
The CAA proposes allowing a capped percentage of bookings to be removed from segregated accounts to pay suppliers in advance and has suggested 20% as an example.
Nunn said: “We agree with a percentage [of funds] being released. But it needs to be case by case, not just for flights and not just a mandated percentage. A cruise can be paid for way in advance. It needs to be mandated business by business.”
The CAA has suggested segregating customer money “may provide comfort to merchant acquirers” when setting the charges for handling travel payments.
Nunn questioned that, saying: “Any protection that reduces reliance on merchant acquirers to pay for failures would help, but it needs clarity around who is liable and who pays [for failures]. We need to bring merchant acquirers along with us to ensure we see the benefit in reduced fees.
“We hope a future consultation will take account of other stakeholders such as merchant acquirers.”
The CAA also proposes segregation of customer payments, or pipeline monies, taken by agents on behalf of Atol holders.
Nunn pointed out: “Pipeline funds are largely protected by Abta bonds and by credit insurance.”
He noted the early collection of balances by Thomas Cook agencies in advance of the company’s failure and said: “There does need to be a review of pipeline protection, but we don’t believe imposing wholesale changes on the way retail agents run their businesses is the answer. It would be unwarranted.
Nunn insisted “More consideration needs to be given to the impact on agents. We would like to see agents consulted.”
Instead, he said: “We fear the consultation has bypassed a lot of agents.”
The CAA proposes introducing variable rates of Atol Protection Contribution (APC) on bookings and Nunn said: “We’re generally in favour of a variable APC to reflect the risks of the underlying protection method.
“In terms of the risk of the individual booking – the value and the lead time – we largely agree with that, but the complexity of reporting could be an issue.”
However, he said: “We don’t want an increase in APC. We’d like to see it reduced [from £2.50] with additional protection in place. We don’t want to see all Atol holders penalised because of one large failure.
“There needs to be a choice. We recognise things have to change and we need to safeguard the Air Travel Trust. [But] we don’t want to be in a place where the failure of one Atol holder [Thomas Cook] has an impact on future protection models.”