Changes to ATOL that take effect today do not go far enough say MPs

1 May 2012 12:18 PM
Changes to ATOL that came into effect yesterday (April 30) do not go far enough say MPs on the Commons Transport Committee in new report.

Fundamental reform of ATOL – the consumer protection scheme for holidaymakers – is needed, according to a report published yesterday by the Transport Select Committee. Changes introduced by the Government that come into effect today do not go far enough. Holiday sales by airlines must also be covered and fairer, more efficient and comprehensive arrangements are needed.

Comments from the Chair

Commenting on this report, Committee Chair Louise Ellman MP said,

"We welcome the changes to ATOL (the holiday consumer-protection scheme) that are being introduced today. Flight Plus will extend financial protection to millions of people who put together their own travel packages with travel agents, mainly over the internet. New ATOL certificates to be issued with holiday bookings should provide greater clarity for holidaymakers.
But other aspects of ATOL remain unsatisfactory. The charges are unfair to some consumers and to sections of the travel industry. The Air Travel Trust Fund that backs the scheme is £42 million in deficit. Information can be unclear and protection is patchy for passengers who book flights only; and holiday sales by airlines or some types of travel agent (agents for the consumer) remain outside the scheme.
The Government does not have a plan for comprehensive reform. It has listened to the travel industry but has not researched the views or booking behaviour of passengers and holidaymakers. There is no clarity about protection for passengers who book a flight only.”

In its report the Transport Committee calls on the Government to clarify its objectives for ATOL reform, to ensure that all passengers and holidaymakers are properly informed of the potential consequences of airline insolvency and the options available to them to obtain financial protection. MPs also recommend that:

  • The Civil Aviation Authority should work with the airlines to develop a code of practice covering information for all consumers making overseas holiday or travel bookings. This must be designed to ensure that passengers understand the risks of being stranded abroad as a result of airline insolvency and are aware of the insurance options available.
  • The Government undertake research into consumers’ views on whether, and in what ways, the ATOL scheme should be extended.
  • The Government must distinguish between issues related to consumer protection and repatriation cover.
  • Future reforms should be funded by the travel industry and must provide consumers with informed choices on protection options.
  • ATOL Protection Contributions should be linked to the value of the holiday booking, instead of the current flat rate of £2.50 per

Further Information

The Air Travel Operators' Licensing (ATOL) scheme was introduced in the early 1970s to protect consumers purchasing package holidays against the risk of their tour operator becoming insolvent. Whereas the scheme once covered the vast majority of holiday bookings it now covers less than 50% and the proportion is falling rapidly.

Information for passengers about the risks of being stranded abroad and the protection options available is inconsistent and consumers can be confused about whether they are protected. Coverage also varies – some sections of the travel and holiday industry are obliged to hold an ATOL licence and to pay the ATOL protection contribution (£2.50 per passenger) while others are not. In particular, holiday sales by airlines and certain types of agent (agents for the consumer) are outside the ATOL scheme.

Flight Plus

Under changes taking effect today, the Government has widened the scope of bookings that must be covered by ATOL: when a consumer books accommodation and / or car hire within a day of booking a flight with a travel agent that is an ATOL holder, this "Flight Plus" booking must now be ATOL protected. In addition, a bespoke ATOL certificate will be issued to each customer to clarify the protection provided. To allow the travel industry time to implement the new systems, the full requirements for ATOL certificates do not come into force until 1 October 2012.

In the longer term, the Government is proposing to bring agents for the consumer and possibly the airlines within the ATOL scheme. Provisions to this effect were included in the Civil Aviation Bill. The Government also intends to look at options to put the scheme onto a self-sustaining basis funded by the travel industry and not the taxpayer.

Agents for the consumer

Traditionally, travel agents act as an 'agent for the supplier', where they 'sell' holidays to customers on behalf of travel trade suppliers. However, travel agents can also act as an 'agent for the consumer' where they technically 'buy' the holiday on behalf of a customer'. The courts have held that, as agents for the consumer are not providing flight accommodation, they do not fall within the ATOL requirements.

The Committee's Report shows that the industry is divided over how ATOL should be reformed. Travel agents want to see flight-only sales by airlines brought within the ATOL scheme. However, most airlines are strongly opposed to this idea. It is not part of the Government’s current reforms and would not be permitted under current EU regulations.