The government has signalled its intention to move ahead with Atol reforms requiring travel businesses to separate customer money through trust or escrow accounts.
Aviation minister Baroness Vere told the Abta Travel Matters summit in London on Tuesday: “We cannot have people operating on wafer thin margins relying on payments from customers who are yet to take their holidays.”
The Civil Aviation Authority (CAA) published Atol Reform proposals in April 2021 laying out requirements for licensed businesses to use trust, escrow or separate accounts for customer money, or to provide bonds or a combination the two, in addition to paying an Atol Protection Contribution (APC) on bookings. The CAA also proposed moving to a variable rate of APC.
When the APC was introduced in 2006 it replaced a mandatory requirement for Atol holders to provide bonds except where businesses were new to the Atol scheme or the CAA considered them a financial risk.
Baroness Vere confirmed: “We want to look at consumer protection, and linked to that is Atol. The CAA has done a first consultation. We will be working up a second consultation.”
She said, “there is no clear answer”, but argued: “One thing I know about travel and tourism is that people don’t agree. They never do. Not everyone agreed [with the first consultation].”
However, Vere pointed out she was at the Department for Transport “in the days of Thomas Cook’s collapse”, having joined soon after Monarch’s failure, and asked: “Is it right to use today’s payments to fund tomorrow’s working capital? Not wholly.”
Alistair Rowland, Abta chairman, argued Atol reform would need to be phased in over time, saying: “There will need to be a long lead time to keep travel businesses sustainable, there really will.”
Abta has asked the CAA to consider a five-to-10-year period of adjustment to the proposed changes, but that seems highly unlikely. Industry sources suggest a two-year implementation is likely with perhaps a 12-18-month grace period before the requirements are enforced.
Martin Alcock, director of the Travel Trade Consultancy, highlighted the uncertainty around Atol reform and criticised the delay. He told the Travel Matters summit: “It’s not far off two years since the CAA announced a consultation on Atol Reform and the general environment of uncertainty is enough without this hanging over us, especially when you speak to investors. The faster this can be resolved the better.”
Farina Azam, lead partner in Deloitte’s travel legal practice, warned segregating customer money “is going to be harder for small businesses”. She told Travel Weekly: “If all customer payments suddenly go into a separate account, businesses are going to need other ways to finance working capital.
“It’s going to mean significant changes for businesses to recognise all consumer payments, put them in a separate account [and] have processes in place whereby they can request that money once a customer returns.”
Azam argued: “We wouldn’t want a situation where smaller operators disappear because they can’t comply.”
Abta public affairs director Luke Petherbridge confirmed: “We expect an update on Atol Reform very soon and a second consultation.”
Read more from Azam in the Travel Weekly Insight Report from Monday