Analysis: Get ready for the ‘agent Atol’

The government will move too late to complete reform of the Atol consumer protection scheme next year, but changes could be in place from the start of 2012 with the Civil Aviation Authority (CAA) ready to break its normal schedule of licence renewals in October and April.

The CAA declined to comment on the timetable for reform, but the new ‘flight-plus’ Atol could come into force in January 2012, rather than at the usual renewal dates. That means agents would have to apply for the Atols next autumn.

Transport secretary Philip Hammond is expected to agree to reform of the scheme later this month, although no announcement is anticipated until next month. Travel Weekly understands the Department for Transport remains committed to the flight-plus proposal. This would introduce a new licence covering separate sales of a flight, accommodation and other holiday components by a single retailer.

All retailers selling holidays dynamically – online, through shops or call centres – would require the licence and have to add the £2.50 Atol Protection Contribution (APC) to bookings or pay it themselves.

Who’s liable?

Agents with a flight-plus Atol would remain outside the Package Travel Regulations, meaning they would not be liable for VAT under the Tour Operator’s Margin Scheme or be liable for a customer who has an accident in resort.

However, as Atol holders they would be responsible for rebooking or refunding customers following the failure of an airline or other supplier. The Atol scheme provides funds to repatriate and compensate passengers if an Atol-holder fails, but Atol holders remain liable for their clients if
a supplier ceases trading.

Abta hopes the proposals will exclude flight-plus Atol-holders from this potentially costly liability, but Travel Weekly understands this will not happen.

The association will also be disappointed that ministers will rule out extending the scheme to airlines – at least for now. However, the European Commission is looking at the lack of consumer financial protection for air passengers more closely than in the past. Airlines might be brought within Europe-wide regulations by 2015.

Two issues to tackle

Ministers have to resolve two issues: whether to include seat-only sales through retailers and how to tackle ‘click-through’ sales of flights and accommodation through linked websites.

There is a strong possibility seat-only sales will be excluded from Atol cover, following the lead of Tui Travel, which withdrew its seat-only programme from Atol protection in October. Under the existing system this would remove protection for about one million passengers a year. However, the revised scheme would bring most of these seats back under Atol when accommodation is added to flights.

However, ministers may balk at removing these sales from protection – particularly when reducing the deficit in Atol funding is a major consideration for them.

Ministers can be expected to duck the issue of click-through sales in favour of leaving this to Europe, on the grounds that it will be clear to consumers that any holiday booked through a single retailer or website will be protected. The reform will allow completion of a ‘flight-plus’ booking over several days.

The changes will require only a formal statement to Parliament to modify the Atol Regulations.

A consultation will follow the announcement, with details drafted in the spring and the process completed by September. That would allow the launch of the agents’ Atol in January 2012.

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