CAA criticised for ‘making changes before Atol consultation concludes’

Industry regulator the CAA was accused of making a mockery of the latest Atol consultation by implementing controversial proposed changes to the UK’s financial protection regime before it ends.

The regulatory fallout of the Covid pandemic was discussed in a panel session at this week’s Travel Weekly Future of Travel conference by leading legal, financial and regulatory experts.

Chris Photi, head of travel and leisure at White Hart Associates, said the CAA is already pushing the segregation of customer money from working capital suggested in its latest consultation.

The consultation, the first after UK left the EU members of which must adhere to the Package Travel Directive, closed to comments last month ahead of a second and proposals due next spring.

Among other things, it sought views on the use of trust funds to protect customer money, something trade body Abta, which has called for a delay to implementation, has historically opposed.

However, with September Atol renewals looming the CAA is encouraging firms to agree to trust arrangements segregating a proportion of their revenue as a condition of being granted a licence.

“The biggest criticism of the consultation is they are doing it already anyway,” Photi told the 200 Future of Travel delegates.

“You would expect a regulator to consult first then implement after, not implement and then consult. It makes a mockery of the process.”

Industry legal expert Joanna Kolatsis, director of Themis Advisory, said: “From a CAA perspective, on Escrow, they are doing it already.

“Part of me is thinking, if it’s going to happen anyway and if it’s keeping people in business, great.”

However, she feared delaying implementation could just create more layers of complexity if companies are already in trouble. “We should be trying to simplify things now,” she said.

Photi said regulation demanding the segregation of money into an Escrow, or trust, account was an inevitability following the pandemic when many firms did not have the cash to refund clients.

“Where else is the CAA going to go?” he said. “You would have to be blind not to think that the segregation of funds was something that the regulator would look at.”

Photi said this should be mandatory for all new Atol holders and other bodies with regulatory powers, like Abta, should also be looking at it.

“If you can have segregation of client monies wrapped around the whole industry then segregation of client monies works,” he said.

But he said tour operators were being “picked on” while agents are able to continue using client money through the Abta pipeline scheme and airlines are left out of regulation altogether.

Kolatsis said there remains an issue in the industry of airlines being governed by a different regulatory regime than agents and operators.

“In the pandemic, the airlines came across as the big bad wolves in all this. Where there was an appetite to reform initially, that then stopped.

“The problem is there is a massive disconnect between package travel regulations and EU261 and unless you bring those two things together, in theory, the airlines did not do anything wrong.

“The biggest issue is regulation. This review should be bringing all of those regulations together, rather than all in isolation again.

“We have been talking about this for as long as I have been in travel. It goes back to XL [Airways], there was a review back then. There was talk of a passenger levy, but it never happened.

“When Monarch went bust there was a desire to do something but when Thomas Cook failed we saw how fragmented it was between the airline and tour operator.

“The government has to bring all of this regulation together.”

Kolatsis said in an industry in which traditional airline, agent and operator models are merging a single regulatory regime would better reflect that reality.

“Realistically, if everyone wants to be everything to everyone all that regulation needs to come together. We just cannot do it piecemeal anymore,” she said.

“The government does not understand how the industry works together. How can they possibly understand it unless they pull it all together.”

She added this was the worst time to look at regulatory changes and feared that Covid has been the driver. “I do not think that Covid should be the benchmark going forward.”

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