Published on Thursday, February 3, 2011

ATOL reforms announced

A major overhaul of the ATOL protection scheme has been announced today by the Department for Transport.

Under a new flight-plus scheme, agents will find it difficult to sell a ‘dynamic package’ without having ATOL protection.

They will have to put all income from ‘flight-plus’ sales into a trust account until clients have completed their holiday.

Some in the industry have already said that this will hit cash flow and would be devastating for many agents.

Here's what Aviation Minister Theresa Villiers told Parliament she wants to do by the end of the year:

- Extend protection to include 'flight plus' holidays. This would cover trips including a flight where the various elements are purchased within a specified short period - essentially looking like a package holiday but falling outside the existing legal definition.

- Deter businesses from misleading consumers about their level of protection. Some companies offer holidays which might look like packages but make the transaction as an “agent for the customer” without explaining to the customer that this means forfeiting ATOL protection. These proposals are designed to provide customers with a clear and honest explanation so they can make informed decisions.

- Replace the wide variety of documents which companies currently issue with standardised information for travellers, making it clear when their trip is ATOL protected.

In a statement, she added: "Insolvencies in recent years have shown us how important it is that customers are able to buy protected holidays, but recent court cases have only served to highlight the fact that the scheme is in need of reform.

"These changes will remove much of the confusion surrounding ATOL, while ensuring operators who offer such holidays provide customers with the financial protection they expect.

"As well as improving protection for passengers, these reforms will help us put ATTF finances back on track so that taxpayers' exposure to the fund’s deficit is rapidly reduced and ultimately eliminated.

"I also believe there may be a case for new primary legislation to address other issues in the ATOL scheme and I will be considering this further in the course of the year."

ABTA said the reform was flawed because it excluded airline and website click-through sales from the scheme.

"These exclusions will perpetuate confusion among consumers," it said.

It also said the costs of the ATOL scheme to the travel trade, and ultimately the consumer, must not be at a level that will drive consumers to seek out cheaper, unprotected arrangements (such as booking direct with airlines) or wreck successful business models.

"The proposals must be backed by strong enforcement measures to avoid consumers being left unwittingly high and dry by unscrupulous traders," it said.

Derek Moore, AITO chairman, said: "There is obviously a lot of detail, and the devil is in the detail, but our initial thoughts are that we find the proposal very encouraging and it should help to level the playing field, bring credibility back to the ATOL system and it is good news for consumer.

"As AITO already believes in fully protecting any services our members, the CAA’s thinking is moving in our direction but is less welcome news to those who have misrepresented their intentions in the past.”

TUI welcomed the announcement but said: "We are disappointed, however, that the Government has not announced any proposals to address the anomaly that continues to see flight only sales made by carriers exempted from the ATOL scheme while sales of flight only arrangements made by travel agents and tour operators are covered.


"We believe that this represents a missed opportunity and will continue to call on the Government to take the simple steps required to remedy this.

"Further, we continue to believe that wider reforms in the industry are necessary and we will continue to actively engage with the Government through the consultation process and beyond to help ensure that reforms accurately reflect the market place in which we operate and that customers benefit from a consistent level of protection.”

Thomas Cook UK & Ireland said there is still going to be confusion for British holidaymakers.

"This is not the complete solution to consumer protection," said a spokesman. "We hope today's decision is just a stepping stone and that in future the scope of the ATOL system is widened to include airlines. Only when this is introduced will holidaymakers be able to have total peace of mind that their money is fully protected."

* What do you think of the ATOL reform? How will it impact your business? Does it go far enough?

Please tell us your views by clicking on ADD A COMMENT below.

By Bev Fearis

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  • ATOL reforms

    Insurance,- simples

    By graham sadler, Friday, February 4, 2011

  • Half way there is nowhere.

    Sure it would add £2.50 to his flight costs but O'Leary would just add a 'compulsory option' to include ATOL cover for £10 a time. Having learnt the flaws of the old model, why go to the trouble of replacing it with a new, flawed model? Typical, half baked legislation cooked up by ministers who don't understand the problem. Include direct airline sales or stop wasting everybody's time.

    By ex Severn, Thursday, February 3, 2011

  • What Atol Reforms!

    No Goverment has so far come up with a water tight solution and this just goes on and on and no one is any wiser. In the meantime we are in a vacuum until further discussions take place. The anomaly buying directly from the Airline or a travel agent should not exist and needs to be addressed immediately. It is about time the Airlines participated in the Atol reform and the easiest solution would be that they increase their fares by two pounds so every passenger travelling pays for it automatically to the airline who pays directly to the CAA and it is certain that the taxpayer will not have to fund this operation anymore This will solve the flight only problem without any major headaches. Trust Account was a thing of the seventies and instead of going forward, we are going backwards. Cash flow is a major problem in the industry and trust accounts sound good but who is going to monitor it without incurring additional costs in an industry which is working on low margins.

    By FAST0102 LALA, Thursday, February 3, 2011

  • Insurance

    Why not dump Atol and make holiday protection insurance against failure a requirement of all sellers oh holidays and flights.The cost must be included in any price, not as an add on. I do know one company that was offereing this at I think at about £10. With bulk buying this should be much lower. Mr O'Leary is a business man so ofcourse he complainhs about extra costs!

    By Paul Johnston, Thursday, February 3, 2011


    Once again, Government is taking half a step forward / papering over the cracks / avoiding the issue - choose the cliche that suits you! OK, so another body of what are, in reality, package holidays by any other name, will be caught in the ATOL protection regime (how long will it take though, for someone to find their way around the 'purchased within a reasonable, short period' rule?), but this Government had and has the opportunity to make a real change ... one, single, coherent, 100% comprehensive consumer financial protection levy for all travel arrangements above a 'reasonable, small value!' - paid for by the customer ... Honestly, how hard can it be? I believe customers are ready to pay a couple of quid for absolute peace of mind, and such a regime would kill stone dead the argument between providers and airlines about the latters' obligations - and make no mistake - airlines have a lot to answer for on this issue! For now, if they want to operate a 'click-through' bundled product system, let them take their fair share of the consumer protection costs! And as for the coalition Government - you're 'blue-sky thinking' in all sorts of policy areas ... how about taking off on this one?

    By MATT BATES, Thursday, February 3, 2011

  • A levelish playing field

    It's high time "dynamic packaging" was included under the ATOL regulations. ATOL holding operators pay the price for consumer protection, why others shouldn't has always been beyond me. Airline cover should have been included too but Mr O'Leary would probably have kittens.

    By Alistair McLean, Thursday, February 3, 2011

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