CAA confident April 2024 realistic target for new Atol regime

The CAA update on Atol reform, released on Tuesday, provides useful guidance while leaving significant questions unanswered.

A targeted introduction date of April 2024 appears ambitious given this request for feedback runs to March 24 and a second, formal three-month consultation will be required on detailed proposals – which might not come until the autumn.

There is also no detail in the document on the length of the proposed transition, although the CAA acknowledges this will be essential.

MoreAnalysis: The key points of the CAA’s Atol Reform update

However, CAA head of Atol Michael Budge is confident the start date is realistic, insisting: “April 2024 is achievable. We recognise the need for a transition period. We believe there is enough time even if we consult in the early autumn.”

He declined to say when the second consultation might appear, noting: “We’re working on a detailed timeline. We’ve deliberately not set out the length of the transition period.

“We understand it’s important, [but] it depends on the final proposals. We don’t want to give people false expectations. We want comments back [first].”

Budge explained the update, entitled ‘Atol Reform: assessing the impacts of the options for reform – request for further information’, aims to lay out “our emerging findings and where we’re up to in our thinking – it’s not a finalised view”.

He said: “A lot of the first consultation [in April 2021] was high level. This document looks to provide more detail, in particular around segregation of customer monies, and allow companies to provide more comment.”

He suggested the first consultation sparked “misconceptions” about the CAA’s intentions, saying: “The reaction to the first consultation was that ‘the CAA is only talking about trust accounts’.

“We’re not saying we’ll implement full trust accounts and we never were. We think there are many benefits to segregation, which is not to say trust accounts. Segregation can take many forms. A client account segregates money but does not set the same type of restrictions and could have something that sits alongside it.”

He added: “Bonding is not off the table, but at the moment we see it as complementary to segregation.”

The new CAA document asks questions about prepayments from segregated accounts without going into details on the regulator’s thinking. Budge said: “We shied away from putting in percentages [this time]. We’ve sought to ask questions about what sort of payments should be allowed out of an account and why? We want to understand the principles when allowing prepayments.”

He added: “Payments coming out of an account dovetail into the extent to which there will be changes to the rate of Atol Protection Contribution [APC]. We ask for industry views on what reductions should be in place.

“We’ve set out where our thinking is heading. We’re at a clearer place but not at a final place.”

Which? policy and advocacy director Rocio Concha said: “This further call for evidence is a welcome step forward towards strengthening consumer protections in a sector that has seen several major insolvencies in recent years, with an opportunity to make the scheme more financially sound and strengthen the financial protection of holiday payments.

“The government must also urgently set out legislation to give the CAA stronger enforcement powers, so that it can properly regulate the aviation sector. Without decisive action, some airlines will continue to neglect their legal responsibilities and mistreat passengers, as we have seen repeatedly in the last few years.” 

MoreAnalysis: The key points of the CAA’s Atol Reform update

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