More: Abta demands CAA delays and consults on Atol
The CAA will retain a modified Small Business Atol (SBA) for “genuine small businesses” but toughen the financial criteria on smaller Atol holders and introduce financial checks to rein in a minority who are overtrading.
The authority announced its decision on ‘Rebalancing Atol’, saying it would keep “most but not all” of the proposals unveiled last June. The CAA had planned to abolish the SBA which licenses firms for up to 500 passengers a year, but it has responded to widespread industry disquiet. There are about 900 SBA holders, chiefly agents.
The 500-passenger limit will be retained, but with a new £1-million limit on turnover. The CAA believes this will push fewer than 5% of SBA holders into requiring full Atols.
All SBA holders will need to meet “a basic solvency test” and new applicants will need £30,000 in share capital – not the £50,000 proposed – and a minimum first-year bond of £50,000 (£10,000 more than now). SBA holders required to upgrade to a full Atol will also need £30,000 in share capital. New standard Atol holders will similarly have to provide a £50,000 bond in the first year. The changes come in from October 1.
Atol holders with licensable revenue of £1 million to £5 million a year will be subject to new financial tests. Details will be announced in May for introduction from October, although existing holders won’t have to comply until their licence renewal.
CAA head of Atol Andy Cohen said the tests would “revolve around asset-to-turnover ratio, cash and profitability”.
A CAA study of 100 SBAs suggested 85% would be unaffected by the tests, but 15% would need capital injections ranging from £400 to £245,000. CAA consumer protection group deputy director David Moesli said: “There are SBA companies not far short of minimum solvency requirements and others a long way short. Some may have to do a lot of readjusting.”
The authority will also proceed with a requirement for Atol-reporting accountants to undergo Atol training. It estimates the cost at £600 per business or £1.2 million a year across the sector.
Cohen said: “We received a useful response from the trade to our original consultation and we’ve taken on board the concerns expressed, along with advice from the CAA’s Consumer Panel.
“We’ve arrived at a package of measures where genuinely small businesses can continue to utilise the SBA category, but where no business can offer Atol protection without having gone through a financial test proportionate to their size.
“This rebalancing of the licensing arrangements means the CAA will be carrying out financial checks on all Atol holders appropriate to their size.
“This will enable us to reassure holidaymakers that financial checks have taken place and the likelihood of detriment and inconvenience is reduced.”
He said: “We believe this will help to increase consumer confidence in Atol.”