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Atol reform ‘could reduce protected travel’

Proposed Atol reform risks burdening licencsed companies with costs and red tape and increasing the proportion of holidays sold that are not protected, Abta’s Travel Matters conference was warned.

Responding to CAA chairman Sir Stephen Hillier, the association’s special advisor to the chief executive John de Vial said the issue of consumer protection was complicated.

He said there needs to be a healthy and thriving sector to deliver the sort of protected travel arrangement the CAA wants to see as it contemplates reform of the Atol scheme.

“There’s a real danger in this current situation, and this consultation has the potential to make it worse, that if we have a very heavily regulated sector that has costs upon cost landed on it, that over time you are going to have a more and more unfair playing field.

“Anything but a level playing field across the different business models providing travel is going to lead over time to a shrinking share of protected travel arrangements and might lead to a situation where protected travel decreases and arguably those that need it most have the least access to it.”

De Vial said Atol reform must take place hand-in-hand with addressing the issues related to airline insolvency which the government has been sitting on since the collapse of Monarch in 2017.

Abta members are frustrated that new legislation in airline insolvency is not taking place in parallel with the CAA work on Atol reform despite being included in the Queen’s Speech before last.

“There’s a real sense of unfairness and half a job done,” he said, “and there’s a real detriment to consumers where flight-only is not protected. We think it will be a really retrograde and sad outcome if we cannot get this whole process tied together.”

De Vial said it is important that the state the industry is in due to the pandemic is recognised and that there was no need to rush through reform that could add to the financial burden on firms.

And he questioned the presumption that customer pre-payments and the use of that cash as working capital is at the heart of the problem.

“I’m just not sure tthat is right. Customers pre-pay, and are prepared to, because they want Atol holders to secure the arrangements which they are booking and as a result consumers receive incredible value for money and choice.

“We enjoy world leading provision from a value and choice point of view and pre-payments have allowed that to happen and for those arrangements to be delivered reliably.”

De Vial said the problems the Atol scheme is facing have come as the result of a small number of very large failures [Thomas Cook and Monarch Airlines] which, it turned out, the scheme did not have the security required to deal with.

“There is a danger here that those who have come through the crisis, who have not failed, are now going to be asked to pick up the pieces and replenish the Air Travel Trust as a result of the costs that have been incurred due to those two very large failures,” he said.

It was warned that taking a stronger line on balance sheets, forcing firms to provide more security and requiring them to increase Atol Protection Contribution payments at the same time would be “challenging and damaging to the industry.”

“I’m not sure it will lead to the right result, and it could be very dangerous to the sector coming out of the crisis,” de Vial said.

Garry Wilson, chief executive of easyJet holidays, agreed that firms’ finances and liquidity should be taken into account by the regulator but that segmenting customer money was not the answer.

“Clearly you should not be using customer money as working capital within your business. But it’s important that when customers pay deposits that you can use that money to book various elements of travel.

“By moving everything into segmented accounts, you run the risk of double and treble protection.”

Wilson added: “Our main message is one size fits all does not work. Segmentation in its entirety is not beneficial and we need to look at each company in terms of their financial strength. What’s paramount is consumers are clear that their money is protected and they know what that means.”

Julia Lo Bue-Said, chief executive of the Advantage Travel Partnership, said agents will need time to adapt to any regulatory changesdue to the challenges they are facing in the pandemic. She added that the wider sector cannot be expected to underwrite the risks posed by large companies.

“We cannot have a sledgehammer approach here,” she said. “The industry is in a really fragile state. The [Air Travel Trust] fund needs to be replenished but it takes just a handful of big operators to reduce that and the whole industry is penalised.

“We need to rebuild trust, that’s fundamental, but there needs to be a transition and recognition of the situation the industry is in now and the challenges retailers will face.”

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