Having opened the floodgates to new entrants, the CAA has now gone too far the other way in its latest changes to the protection scheme, argues Abta chairman Noel Josephides
Any regulator has to tread a fine line between ensuring financial stability and competition and over-regulation, which deters new entrants to any market – particularly a regulator carrying a substantial financial risk such as the Air Travel Trust Fund.
When the CAA first announced the creation of the Small Business Atol, many of us holding full Atols saw it as a ‘rogue’s charter’, as the lack of policing of SBA-holding companies meant many could – and would – flout the law.
Needless to say, the SBA proved popular – not least because it was cheap – and all credit to the CAA for substantially lowering the barriers to entry and enabling many small companies, previously forced to hold Atols for tiny amounts of licensable turnover under the Package Travel Regulations, to do so for a relatively low cost.
One extreme to the other
If the CAA opened the floodgates when establishing the SBA, it has now probably gone too far the opposite way.
Understandably, those within the system have not been vociferous in their objections to the authority’s proposals because they are not subject to a minimum paid-up share capital requirement and their existing bonding level will still apply.
The only change they’ll have to watch, especially those in the long-haul market with a high average price, is the £1 million turnover limit before having to apply for a full Atol.
If an operator’s average price is, say, £4,000 a person, once it has exceeded 250 bookings in a year, it would have to switch to a full Atol. They will now be subject to a risk-based financial assessment via the CAA’s newly introduced rules. This will give the regulator the opportunity to tighten its grip on any it considers weak.
Higher barriers to entry
However, for new entrants, the barrier has been raised substantially. There is a minimum paid-up share capital requirement of £30,000 and, initially, a minimum bond of £50,000.
No wonder existing SBAs are not complaining, as their new-entrant competitors will have higher overheads from the start. Is this fair? What will happen is that more potential joiners and start-ups will operate illegally.
And here is the real problem – that of inadequate policing within our industry. There are hundreds of UK-based operators that simply ignore the regulations, whether out of ignorance or by design. Then there are the hundreds of organisations based abroad, which market in the UK but do not comply with UK regulations.
The CAA has no inclination to increase its administrative overhead either. It is encouraging these small start-ups to apply via accredited bodies, which often provide member benefits with a commercial value, as well as, of course, cushioning the CAA against tour operator failure.
This will mean extra expense for the fledgling tour operator, adding to start-up costs. This may be good for the likes of Abta, but is possibly an unnecessary expense for the new operator.Somehow, the balance is not quite right at the moment.