Industry views on variable rates of Atol Protection Contribution (APC) appear divided with a leading Atol specialist in favour of a value-related variation but a trust provider suggesting variation by booking value should not be needed where firms operate trust accounts.
The CAA’s Atol Reform consultation makes clear the APC rate will rise overall either through an increase in the £2.50 ‘flat rate’ or a switch to a variable rate.
It proposes three variable-rate options based on the ‘risk’ posed by an Atol holder, the ‘value’ of a booking or a ‘hybrid’ of both.
Alan Bowen, legal adviser to the Association of Atol Companies (AAC), said: “The APC is going to have to change because there is no money in the Air Travel Trust and the £400 million insurance policy which backs it has gone.”
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Speaking on a Travel Weekly webcast, Bowen suggested the £2.50 rate “isn’t going to be sufficient” and argued: “It doesn’t make sense to pay £2.50 for a £500 holiday in Benidorm and £2.50 for a £15,000 fly-cruise departing in 2023, particularly now people are booking for 2022 and 2023.”
Bowen pointed out the CAA already has financial tests in place “which every Atol holder has to meet every year in order to get a licence renewal”.
He said: “If a company is clearly more at risk because it’s poorly capitalised, if it is on the edge or below the expectation then I have no problem the CAA saying ‘You’re going to have to increase your APC payments to reflect the fact that we’re taking on a greater risk’.”
Bowen added: “I would go for a ‘hybrid’ rate based on the sale price and the risk.”
However, Daniel Landen – managing director of trust account provider Protected Trust Services – argued: “A trust account doesn’t differentiate between a £500 and a £10,000 payment. We treat all payments the same.
“A correctly run trust account, where you separate client funds by company and down to individual consumers, [offers] a huge amount of protection where the variables become less significant.”
The CAA consultation notes the current flat rate APC “means companies [with] an increased chance of failure . . . pay the same as companies [which] pose a lower risk”.
If risk-based pricing comes in, it suggests: “Those who operate trust accounts with maximum levels of protection in place would pay the lowest level of APC.”
The Atol Reform consultation was due to close on July 30 but has been extended to August 15.