Abta has urged a two-year delay to any Atol reform and a five-to-10 year transition to new arrangements after consulting its members.
The association has warned a rush to make substantial changes “could seriously damage the recovery prospects of the industry and prove counter-productive” by triggering failures.
In a response to the CAA’s Atol Reform consultation which ended last month and received more than 300 responses, Abta reports “concern about the ability of travel companies . . . extremely hard hit by the pandemic to adjust to any proposed changes”.
It notes “the current negative sentiment” of financial services toward the sector” and warns it “would be difficult if not impossible to manage the simultaneous introduction of changes to financial criteria alongside . . . new primary security solutions (trusts, bonding, insurance) and rebuild the [Air Travel Trust] Fund”.
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Abta repeats widespread industry calls for reform of Atol to occur only alongside action on airline insolvency and a review of the Package Travel regulations (PTRs) and insists there should be a choice of financial protection methods rather than mandatory trust arrangements.
It points out a “pro-choice model reflects the arrangements in place under the PTRs where a range of bonding, insurance and trust account solutions are permitted. Members feel strongly that these options could be extended.”
The association urges the CAA to permit “greater flexibility [by] allowing different financial protection instruments to be used in conjunction with each other”, an approach the Department for Business (BEIS) is considering as part of its review of the PTRs launched this summer.
Crucially, Abta reports “considerable opposition to enforced segregation of customer monies”.
It warns the CAA: “Any move to segregation of monies would require the rebuilding of company balance sheets which would need time and might not be possible in all cases.”
Abta also warns segregating customer payments could hurt smaller businesses and the UK sector as a whole, noting “enforced segregation would distort competition as some companies would be better able to accommodate or negotiate supplier terms because of their business model or market strength, potentially disadvantaging or excluding SMEs”.
In addition, “any restrictions on supplier prepayments could disadvantage UK companies against overseas competitors”.
The association acknowledges members are divided on proposals to segregate ‘pipeline monies’ – customer payments to agents, held on behalf of Atol-holders. It notes: “There is fuller support from principals . . . [but] many agents view these proposals as a fundamental challenge to the travel agent business model, undermining their ability to negotiate business-to-business commercial arrangements.”
Yet Abta’s members support a proposed move to variable rates of Atol Protection Contribution (APC) “provided it is transparent and reflects the specific company risk to the ATT Fund”.
A consultation on Atol reform was launched in April 2021, and the Civil Aviation Authority is currently in the process of considering more than 300 responses.
Michael Budge, head of Atol licencing, said: “We are undertaking an impact assessment of these different options to determine their suitability.
“We would like to reaffirm that no decision has yet been made and that the Civil Aviation Authority will be considering all evidence and opinions provided to us.
“Our proposals for changes will be set out in the second consultation document which is due for publication in spring 2022. At that point, Atol holders and other stakeholders will be able to further comment on the proposals, prior to any changes being made or transition period starting.”
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