The CAA has unveiled a new financial-assessment process for Atol holders which will apply to small business Atols (SBAs) as well as standard licence holders.
The new regime comes into force from June 1 following a CAA consultation on proposals first published in 2014.
The regulator originally planned to abolish SBAs, licensed for up to 500 passengers a year and £1 million in revenue, but issued a reprieve following opposition from the trade led by Abta.
The CAA said the changes would “ensure all Atol holders are subject to robust financial tests”.
It published an online self-assessment tool this morning to help companies prepare and will advise Atol holders on whether they meet the criteria in advance of the implementation date.
The assessments comprise “a set of financial ratios” based on a company’s year-end accounts, which will be weighted and combined to produce an overall assessment of the firm’s financial position. This “will inform licensing decisions”, said the CAA.
It forecast the changes would reduce the assessment burden for firms licensed for ‘standard’ Atol revenue of between £5 million and £20 million a year.
The assessments for SBAs involve a set of four ratios and those for standard Atol-holders seven ratios. These relate to financial stability, liquidity (cash flow) and profitability.
Standard Atol holders will be required to submit audited financial statements, while SBA renewals will require financial statements prepared by accountants recognised by the CAA.
The CAA may require additional information where it considers there is a higher risk of failure, including where a programme is highly seasonal or “limited in the number of destinations offered” or “a high percentage of flights or accommodation are sourced from one supplier”.
The regulator said “a leading international credit-rating organisation” and “professional services firm with expertise in travel” had helped design the tests.
Larger Atol holders already undergo financial assessment and will see no change to the licensing regime.
Andy Cohen, CAA head of Atol, said: “The existing tests have been in place for more than 30 years and needed updating to reflect risk-based methods for financially assessing the likelihood of business failure.
“Our primary objective is to reduce the risk of travel company failure and the subsequent impact and disruption to passengers.
“The new assessments will mean we’re better placed to identify in advance those companies in, or at risk of, financial trouble.”
Cohen added: “If an existing Atol holder would like to know whether they meet the new criteria, ahead of their renewal, they can send us a self-assessment form online.
“We’ll review the information and tell the Atol holder whether they would pass the assessment or what improvements are required.
“We’ll be communicating with Atol holders about how to do this.”