Atol holders have less enthusiasm for a return to bonding as the mainstay of consumer protection than they do for a compulsory move to trust accounts, according to the CAA’s summary of responses to its Atol Reform consultation
But a majority of Atol holders back a CAA proposal that they be allowed to choose the form of financial security they use – the so-called ‘tailored’ option in the Atol Reform consultation – which could include bonding.
This would see the CAA set the level of funds requiring protection and allow Atol holders to choose the form of security to suit their business – by segregating funds, bonding or a combination of the two.
More: Atol Reform: Industry delivers lukewarm response to CAA proposals
The CAA summary of consultation responses, published in May, reported the majority of Atol holders consider the CAA should not mandate the use of bonds, with “more opposed to mandatory bonding than mandatory segregation”.
Bonds were the main form of financial security required of Atol holders up to 2008 when the Atol Protection Contribution (APC) was introduced.
Since then, bonds have been required solely of new Atol holders – for the first four years of business – and those the CAA judges to pose a financial risk.
The consultation found concern that “the lack of competition” in the bonding market would “financially disadvantage” Atol holders.
There was doubt about the viability of the bonding market “particularly for larger operators” and the requirement for additional capital to support bonds “was seen as restrictive and damaging”.
However, a minority noted bonding “was effective prior to 2008”.
The CAA noted “a number” of respondents favoured a mix of bonding with segregation of funds, but that “a significant number” of these did not agree with either.
It did not indicate how many opposed a choice but said respondents which did considered it “would create excessive complexity”.
By contrast, “the vast majority” of Atol holders considered different approaches “appropriate depending on the size of Atol holder”.
However, the integrated airline groups “did not consider the size of organisation should be taken into account”, while “smaller operators argued they should not be treated the same [since] large operator failures had a [more] significant impact”.
More: Atol Reform: Industry delivers lukewarm response to CAA proposals