The CAA has insisted it has “no fixed view” on Atol reform and is “not wedded to a direction of travel”.
CAA head of operations Michael Budge laid out the reform proposals in a consultation this summer when he addressed an Abta Travel Regulations Conference last week.
Budge noted: “There has been a lot of speculation that the CAA has a fixed view, but it is open. The CAA has no view. We’re not wedded to a direction of travel.”
He also denied the CAA had used recent Atol renewals to impose trust arrangements on some businesses, saying: “There has been no attempt to drive an outcome [in recent renewals].”
However, he conceded: “Many of you will be aware the CAA has focused on liquidity and its relationship with customer monies [and] this consultation started this discussion more widely.”
Budge also acknowledged: “The consultation is considering some of the most significant plans for Atol reform in the scheme’s history.”
He told the conference: “Our analysis has indicated some businesses do use customer advance payments to fund their operations. This has been a long-standing practice, but in some cases it may have failed to incentivise robust financing arrangements.
“Our analysis from before the pandemic and of failed businesses – not only of Monarch and Thomas Cook but of smaller and mid-sized operators – shows we need to carefully consider the means by which travel businesses fund financial protection.”
Budge argued: “Our goal is to improve the financial resilience of Atol holders alongside better risk pricing. This reform does not seek to prevent certain business models.
“Segregation and trust accounts form part of the consultation. We set out a mandatory approach that proposed segregation or bonding. We proposed different forms of segregation – trust accounts, escrow accounts and client money accounts – [and] we talked about total segregation and partial segregation.
“We also proposed a tailored approach including segregation or bonding or a mix of the two.”
Budge noted the CAA is considering a risk-based Atol Protection Contribution (APC) alongside this which would “better charge for the individual risk posed by an operator”.
The consultation drew more than 300 industry responses and he admitted: “There wasn’t strong support for segregation.”
But he added: “There was even less support for bonding. The majority favoured a choice. [They] agreed customer money should be used for that customer’s holiday [and] felt a variable APC should be used – that those more at risk should pay more.”
Budge argued: “We’re aware reform of this scale will take time. We’ll take full account of the time needed to adjust. We’ll publish a response in early 2022 and present final proposals next year. We’re mindful of the decisions the government may take in other areas.”