So now we know – the ATOL levy will rise from £1 to £2.50 on October 1 and not £3 as feared. All that industry anger had some effect.
Now we can move on to considering a replacement for the current scheme. Just let’s hope the impact on bookings in the meantime is minimal. The Department for Transport suggests £2.50 is less than 0.5% of the average package price, but it is difficult to believe the average holiday is selling for more than £500 in the current market. We will a have a clearer picture in the autumn.
It was not difficult to foresee the DfT plumping for £2.50 rather than £3. The Civil Aviation Authority’s recent consultation document set up precisely that outcome. No doubt some of the industry responses could only be broadcast after the 9pm watershed. Going for the lowest CAA-recommended option allows the department to say: “We have listened and taken what you say on board.”
At bottom, this was a done deal before it reached the consultation stage. ATOL consumer financial protection was a goner without Barclays extending the credit of the Air Travel Trust Fund. Barclays were not going to do that without the government increasing its guarantee, and neither would do either without payments into the fund being at a level sufficient to clear the overdraft by 2011-12.
The announcement’s timing was something of a surprise, however. The CAA has not even published a summary of the consultation responses, as is normally the procedure. The DfT has acted with unusual alacrity. Maybe the consideration only took a moment. Maybe ministers are keen to get away on holiday.
The CAA itself had no comment to make and, at the time of writing, the rise in ATOL Protection Contribution was hard to find on its website – not even on the APC home page in the “trade area” or listed under “consultations completed and policy material published”. However, it is there – under “consultations and letters of intent“, if you click on “view all consultations“.
The DfT statement reiterates its intention to consult on reforms to the ATOL system in the autumn “to make it fairer and more understandable for consumers”. Those who think that inevitably means a scheme more favourable to the trade – or at least their portion of it – may be disappointed.
It also says: “The CAA intend to review the rate of APC before the Air Travel Trust Fund moves into surplus, projected to be by the spring of 2012.” There is clearly hope that will mean a return to a £1 levy. ABTA stated as much in its response to the announcement. I would not bet on it.
Clearly, at some point the scheme should become self-financing – the overdraft will be cleared and the fund in credit, with money invested and insurance in place to cover a major collapse. The scheme almost certainly will be widened and a smaller levy could keep everything ticking over as that point is approached. But that scenario is some way off – probably a minimum of two years.
There is also the possibility that widening the ATOL scheme will increase the risk of failures – and that the CAA’s projected figures prove overly optimistic, which has happened before: last year, in fact.
And talking of the figures, it would be useful to know whether TUI Travel and Thomas Cook plan to remove ATOL protection from their seat-only sales this autumn – a move they have considered and that could deprive the fund of perhaps £2.5 million at a stroke.