The CAA is listening but the issue of airline insolvency remains the glaring omission from the discussion, says Travlaw’s Matt Gatenby
When I was 15, I received feedback on an English literature GCSC mock exam. The commentary was along the lines of “Great, well written, thoughtful, with excellent analysis. Your grade is ‘F’”. I was told yes, I had written a fantastic essay – just not one answering the question on the exam paper. It was an important lesson in sticking to the brief.
At the time of writing, the debate about Atol Reform is raging and there is a wide range of views and opinions from travel businesses, experts and other commentators.
As a private practice legal advisor, I can say that our own client base mirrors the range of views across the industry – some think the Atol scheme is utterly broken, some think it is basically fine, and there are a lot of positions in between. Here are some observations:
- Firstly, having spoken to many travel and leisure businesses, it is clear there is broad alignment with the Civil Aviation Authority’s (CAA) thinking that a review of financial protection, licensable and not, is overdue and welcome. The fundamental system we have has been in place for many decades, and as the Package Travel Directive recognised in 2015 – times have changed.
- Secondly, when there is constructive analysis and debate about financial protection reform there tends to be focus on the same issues. We see commentary about the Atol Protection Contribution, Air Passenger Duty, the role of trusts vs bonds vs insurance, how merchant service providers fit in, how segregation of funds should and can work, and so on.
- All those elements above (and many others) are important, but the question posed on a regular basis for many years is “What about airline insolvency?” More on that below.
- Next, there is agreement that the CAA either needs to listen or do something. It seems to me that the CAA is doing both, so recognition of that is only fair. Returning to the idea of a fictional exam question, it seems to me that the CAA is answering the only question open to it. As wardens of the Atol system and everything associated with it reform of that area is all the CAA can do.
- The aim of the current reform remains a bit nebulous. On the face of it, everything suggests the point is enhancing consumer protection. Whether that is achievable is one question – but whether the cost of raising the barriers to entry into the market for new travel businesses, and the consequent reduction in consumer choice, is worth that goal is another. The March 31, 2023 renewal figures suggest that we are seeing more licensable sales, but through a smaller selection of Atol holders; it appears it may already be happening. The number of new and existing clients we advise who are providing packages but looking to strip out flights and “let the customers sort those themselves” is palpable – it is easy to argue that that is delivering less protection for those consumers rather than more. Of course, the more cynical commentators may say that the CAA’s goal is to remove the cost and risk of the Air Travel Trust Fund from the governmental purse – if so, why not just say so?
- Lastly, there is clearly a general view within travel that, given we are a highly regulated industry, it might be helpful if the regulation was coming from one place. We have the Department for Transport over airlines, Department for Business and Trade over package travel and the CAA on Atol. If all those bodies are on the same page, great. The observation I am forced to make here is that they are, sadly, not. This is surprising as there is no disputing that the areas being regulated are closely and intrinsically linked. Questions about package travel cannot be asked without reference to airlines and financial protection. Questions about any form of financial protection cannot be asked without reference to airlines and package travel. And so on.
In conclusion, we the industry are certainly addressing a question that needs answering. It is only one, admittedly big, question among many that need answering. It is not The Answer, however.
We will not reach the end of this process and discover we had the question wrong all along, we have simply yet to answer the question that we have all formulated, but which refuses to be answered – that of airline insolvency. Until that is addressed, and properly, the answers to any questions the CAA or the wider travel industry may offer will remain unsatisfactory and inadequate.
This article was first written for Abta’s Travel Law Today magazine (issue 15), which will be published at the upcoming Travel Law Seminar – 25th Anniversary on May 10-11. Matt Gatenby will be speaking on Atol reform at the event. To find more information and register, click here.