Civil Aviation Authority (CAA) head of Atol Michael Budge explains the request for further evidence on Atol reform
In January we launched a call for evidence asking for feedback from the travel industry as part of our programme to reform the Atol financial protection scheme.
At its core, the objective is to increase the financial resilience not only of the scheme but also of the wider industry.
The Atol scheme is there to protect consumers. Of course, we recognise consumers benefit from the wide range of choice available in the package holiday market. But we’re clear that changes need to be made and for some Atol holders this may mean having to look closer at their sources of funding.
We want to continue to support a competitive and vibrant industry that meets the varying needs of holidaymakers as the appetite to travel continues its strong return after the pandemic.
Evidence of this is our biggest-ever peak booking campaign which reminds people of the importance of organising their package holiday with a company they can trust, knowing their booking will be financially protected by Atol.
The fact that the travel industry is so diverse means businesses have very different structures and ways of operating. A bricks-and-mortar, family-run travel business will have different views of the Atol scheme from a vertically integrated travel business with an airline or one that operates primarily online.
Listening to feedback
We received more than 300 responses to our initial consultation on Atol reform and have listened carefully to what people told us.
We’ve sought to provide more clarity on our thinking and how options for reform could work in practice, recognising the industry’s diversity, as well as providing our emerging findings on our Atol reform programme to engage stakeholders in a meaningful way.
We are conscious that some stakeholders interpreted our first consultation in a certain way. This update is not only to build on the feedback we received but also to highlight that we understand some businesses pay suppliers of a holiday in advance and to dispel the view that the reform is only about mandatory trust account arrangements where all customers’ money is locked away until a customer returns from their holiday.
We need to be sure any changes we implement are viable across the sector and this is why we’ve published a further call for evidence on these findings. We want Atol holders to engage with us as we finalise our thinking on the best route to reform.
In summary, we’ve indicated that a form of segregation of funds is our emerging preferred option along with why.
The update provides several potential options on how segregation of monies paid to holiday firms by customers could be implemented. These include total segregation or some sort of hybrid approach where bonds and other financial products are used as additional measures to enhance the protection of customer monies, alongside some form of segregation.
Atol Protection Contribution
Reform continues to focus on aligning the Atol Protection Contribution (APC) with risk. We ask several questions around the APC and whether there should be a variable rate rather than the current flat rate and, if so, how this variable rate should be calculated.
Additionally, we ask whether the rate should differ based on methods of segregation (or other protection of customer monies) and whether travel businesses with an airline should pay a different rate to reflect the repatriation-cost risk.
We also ask for views on whether the CAA’s approach to modelling the impacts of the different options is robust and whether the criteria we’re using to assess the options are appropriate.
We know people have been waiting for us to outline our next steps. This is the opportunity to engage with us and tell us whether you agree or disagree with our findings and why.
If people can give us evidence or research to help inform our decision making, even better.
Next steps
We are provisionally targeting the beginning of implementation of any final changes from April 2024, but we understand we will need to take full account of the impact of any changes and allow a period of transition for the industry to adjust accordingly. We anticipate a further consultation on our final proposals accompanied by a firm idea of timescales later this year.
We want to get this right. We would encourage all interested parties to respond before the deadline of March 24.
At this stage, no final decisions have been made on preferred options for reform, which is why we’re giving stakeholders this further opportunity to have their say and answer our series of targeted questions to help us finalise our reform proposals.