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Comment: Why separate Atol reform from the Package Travel Regulations?

The government and CAA need to get this right, argues Abta’s Luke Petherbridge

With the CAA now having published its updated thinking on Atol reform and seeking industry input, it’s time for Abta to again ask a familiar question – why is the UK travel industry subject to such a complicated regulatory framework?

Two sets of regulations, two government departments, at least three different enforcement bodies and payment card chargebacks are all seeking to solve one problem.

We know broadly the options in play for future protection of travel customer monies – bonding, segregation of customer monies and financial failure insurance, and perhaps a mix of these – whether or not holidays include flights.

With reviews of both Atol and the PTRs under way at the same time, it seems bizarre that those responsible for each system are not exploring options together, to reduce burdens on businesses, remove duplication and create a system that is easier to understand and delivers better results for all, including for consumers.

It’s becoming clear that some form of enforced segregation of customer monies is front of mind in relation to Atol – a point expressed by aviation minister Baroness Vere at Abta’s Travel Matters conference in December. Introducing mandatory segregation for all travel businesses would be a fundamental change, forcing businesses to adapt their models and potentially to seek additional funding depending on the level of segregation required.

Yet it would be extraordinary to consider such a significant change without any thought for the work being done elsewhere in government on the PTRs which are also due to be reviewed this year. Abta is urging the CAA, Department for Transport (DfT), and Department for Business (BEIS) to work together to deliver a cohesive approach across both regimes.

The CAA has come in for criticism in some quarters around timings and the fact that this isn’t the second-stage consultation originally promised. We understand the frustrations. However, the industry is emerging from the most serious threat it has ever faced. It seems entirely reasonable for the regulator to want to test some of the feedback it received in summer 2021 before making proposals which could change the travel landscape dramatically.

Companies were finding it extremely difficult to renew or obtain bonds at that time, with many facing huge increases in premiums to meet their regulatory obligations. That will almost certainly have swayed the view of many respondents around the suitability or desirability of bonding. Yet, feedback we’ve received is that many businesses have a clear preference for bonding over other protection mechanisms.

Abta will be urging the government to get this right this time. We have already reconvened our financial protection focus groups which will bring together the industry and financial service providers to debate the future of financial protection and how we can ensure a more seamless, coordinated approach to protecting consumer monies. We will also be discussing the CAA’s paper in depth with our standing policy committees and engaging with all Abta members through conference calls and other mechanisms.

There are plenty of topics to chew over, including segregation, a variable APC, the treatment of integrated airline groups, and whether it is appropriate for the CAA to force businesses into certain business models.

We look forward to what will be a lively debate over the coming weeks. But two things remain clear. First, we must retain flexibility within the financial protection system. One size doesn’t fit all. Second, we have an opportunity to remove complexity and make things easier for all businesses in the industry – we must seize it.

Atol reform and the PTRs will be explored at Abta’s upcoming Travel Finance and Travel Law conferences.

Luke Petherbridge is Abta director of public affairs

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