Travel agents face increased costs from proposed changes to the Atol consumer protection scheme that threaten a serious impact on many businesses, according to leading industry lawyers.
The Department for Transport is currently examining industry responses to a consultation on the proposal to introduce a “flight-plus” Atol, which would be required to cover any travel transaction involving a flight and one or more additional holiday services.
Laura Harcombe, partner at legal firm Dawsons, told an Abta travel law seminar in London: “Every business selling a flight plus other holiday services will need an Atol unless it acts as an agent of another company.”
This would apply to online retailers as much as high street agents.
The move has been broadly welcomed by the industry. But Harcombe warned: “The potential impact on agents could be considerable, particularly on those that do not hold an Atol.
“They might require an Atol in their own right and have the financial costs of paying the Atol Protection Contribution [on bookings]. They would be assessed as a new entrant to the market even though they may have been trading for many years.
“If an agent sells a flight-plus holiday, all money would have to be protected at the agent’s cost unless the agent only deals with suppliers that are bonded.”
The Civil Aviation Authority currently requires new businesses applying for Atols to provide a bond for the first four years of operation. Its size depends on their turnover and diminishes over the period.
Industry accountant Chris Photi said extending the requirement to travel agents requiring the new ‘flight-plus’ Atol would be “anti-competitive”. He said: “I have no idea where agents will get bonds. It will be much more expensive than before the credit crunch.”
Photi added: “The introduction of the Atol Protection Contribution [which largely replaced bonding in 2008 for all bar new entrants] has decimated the bond insurance market.”
CAA consumer protection group deputy director David Moesli confirmed that agents requiring an Atol under the new scheme would be likely to require a bond based on 10% of their turnover, “provided they are genuinely trading as an agent”.
However, Moesli insisted: “We have to take into account the fact that companies have been trading successfully, and they will have to meet the financial criteria.”
He added: “But this is all hypothetical. There is nothing on the table yet.”
The scheme would not widen travel agents’ liability to cover injury to a client abroad, as ‘flight-plus’ holidays would be outside the package travel regulations.
“However, there is a risk agents will be regarded as a principal for VAT purposes,” said Harcombe. “That is a concern.”
There is hope transport secretary Theresa Villiers will announce the results of the consultation and outline proposals for the flight-plus Atol scheme by the end of July, allowing a consultation on the details this autumn. However, the timetable could slip.