FTO calls for dismantling of ATOL system

The UK’s major tour operators have called for the abolition of the ATOL protection scheme in favour of a levy on air travellers.

The Federation of Tour Operators made the call while warning of a “very real danger” of financial crises amongst airlines due to difficult market conditions which would leave travellers stranded abroad.

The FTO said its preferred option would be for the government to dismantle the ATOL system and to adopt recommendations made by the Civil Aviation Authority for a flat levy on all air passengers – a measure supported by the Transport Select Committee and consumer groups but opposed by scheduled airlines.

The FTO said it welcomed CAA proposals to move from the existing bonding arrangements under the ATOL scheme to a Consumer Protection Charge as a necessary first step in that process.

FTO chairman Ian Ailles (Thomas Cook) said: “Whilst we recognised the risks attached to that proposal, provided those risks were properly addressed, we were happy to give our support. In particular we saw this as a good way of achieving both a readily understandable consumer protection policy and a level commercial playing field.”
 
Individual operators may be forced to find solutions outside the ATOL system in order to compete on equal terms.

This would reinforce an “incomprehensible” consumer protection policy and add to the inequalities in the commercial playing field, the FTO warned.

Ailles said: “In the absence of any government action, operators will need to protect their competitive position, which may involve dismantling existing financial protection arrangements designed to protect consumers.

“In the long term, this cannot be in the consumer interest or what the government desires, but it is wrong to penalise one type of business only and government has shown no willingness to act on behalf of the consumer.”
 
If the ATOL system is to be retained, it must be extended to include airlines and relevant internet travel arrangers, the FTO stressed while saying that operators are running out of patience about inaction by government.

The current protection schemes for air travellers remain hugely confusing following the recent Court of Appeal decision, which concluded that a protected ‘package holiday’ was only created when a holiday was sold in combination at an inclusive price, with customers having no easy way of knowing whether they are protected, the FTO said.

“Tour operators remain at a clear commercial disadvantage to competitors such as the no-frills airlines and some internet-based holiday companies which continue to avoid the substantial annual costs of compliance with the ATOL regime.

“These costs include the requirement to pay a financial institution to guarantee typically 10-15% of the tour operator’s annual projected turnover in the event of financial failure. This system has worked well over many years but the nature of overseas travel has changed dramatically with the growth of internet and no frills flying.”

The FTO also said there was a “tactical need” to replenish the funds of the back-up Air Travel Trust, which is millions of pounds in the red, with a small levy charged for a limited period only. Operators could disclose this in brochures and itemise separately. 

“However, the FTO see this ‘tidying up’ of the old scheme as simply one of the steps that need to be carried out to deliver an equitable, understandable protection scheme, not something that is carried out in isolation from the wider reform,” the organisation said.

Report by Phil Davies