Atol fund debt reduction paves way for reform

The rise in the charge for consumer protection on package holidays from £1 to £2.50 last October slashed almost £15 million off the debt of the Air Travel Trust fund that pays out when a company fails.

The fund remained almost £32 million in debt at the end of March, but the rate of decline suggests the debt will be cleared by the end of the current financial year – allowing a reduction in the £2.50 Atol Protection Contribution (APC) on holidays.

The Department for Transport is considering proposals for reform of the Atol scheme that would also widen it to include all sales of a “flight plus” additional elements of an overseas holiday and allow a further reduction in cost. The Air Travel Insolvency Protection Advisory Committee (Atipac) called on the DfT to clarify its plans as the trust fund annual report, published today, laid out the figures.

The 21 million Atol-protected passengers in the year to March contributed almost £36 million to the fund. However, £11.4 million was paid out to repatriate or refund customers following company failures and a further £11 million went on administration, insurance, bank charges and interest payments.

Twenty-nine Atol holders failed over the 12 months, fewer than expected, and 19 led to calls on the trust which paid for 2,5000 passengers to complete their holidays and refunded 45,000 others.

Despite the relatively low number of failures amid recession, the report notes: “The underlying cost of failures increased year on year.” Total pay-outs fell from £36 million the previous year, However, £28.6 million of the 2008-09 total was due to a single failure – that of XL Leisure Group. The XL failure cost the fund an additional £1.6 million in the year to March.

Five fresh company collapses made a major impact – the biggest, Scottravel which failed in June 2009, cost £4.3 million.

The failure of Hebridean International Cruises (April 2009) cost £1.8 million, Allbury Travel Group (December 2009) £1.2 million, Freedom Direct Holidays (April 2009) £1 million and (November 2009) £950,000.

Scotttravel was the most damaging failure since the company had no bond and was licensed for just 1,640 passengers, but had 1,300 abroad when it ceased trading and more than 15,000 requiring refunds.

By contrast, the Globespan Group – and its airline FlyGlobespan, which failed last December – had a bond of £5.5 million. This more than covered the 1,000 passengers who required repatriation and 9,000 entitled to refunds.

The Civil Aviation Authority, which oversees the Atol scheme, requires a minority of companies to provide bonds in addition to passengers paying the APC.

ATIPAC chairman John Cox said: “The difficult economic conditions have put real pressure on the travel industry. However, we have been surprised at the resilience of the industry and the travelling public. There were fewer failures of Atol holders than expected and we believe this will continue in the forthcoming year.”

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