UK Government Pressing Ahead with ATOL Reform

The UK’s Department for Transport has launched a consultation on aviation regulation, which includes proposals for reform of consumer holiday protection. The measures would extend the scope of the ATOL (Air Tour Operators Licence) scheme to deals where a flight and another holiday component are purchased by various methods, not only a package holiday. The UK Government says it is not prepared to wait for new European regulations on the matter.

“Clarifying the legislation to bring all sales of ‘flight plus’ holidays unequivocally under ATOL protection would increase clarity for the consumer and bring the regulations up to date with the modern travel market,” says the DfT in its consultation paper. “It would also create a simpler regulatory regime. Any person selling ‘flight plus’ holidays would require an ATOL licence. ‘Flight plus’ would cover all flights bought together with accommodation, car hire or other significant holiday elements for use in the same holiday.”

As the UK Government consultation follows less than one month after the European Commission launched a consultation on reform of the Package Travel Directive, the UK Government is in the position that it is pressing ahead but any changes in the law or regulations would be interim measures and may need to be changed again in line with European legislation.

The Government admits that while its main aim to bring clarity to consumers, its favoured proposals will increase the financial burden on businesses, as more companies would be brought under requirements for ATOL licensing and bonding.

A crucial new element proposed in the UK Government consultation is to bring non-air travel packages within the jurisdiction of the Civil Aviation Authority and the Air Travel Trust to provide ATOL-style financial protection for consumers. This would require a change in the law and the Government is to work with the travel trade on how to create a workable solution: “There are a number of practical issues to be resolved in connection with this proposal, including that the CAA and ATT do not currently have the necessary legal powers to protect non-air packages,” says the consultation paper.

“We believe that a voluntary, commercial arrangement between firms and the Trustees of the ATT could be the most appropriate way to bring the non-air packages of certain current ATOL-licensed companies under the regulation of the CAA, and understand that the ATT trustees are willing to consider the options for how better regulation benefits might be delivered. “Depending on the response to this consultation, the Government, the CAA and the ATT trustees intend to work with the travel trade to identify and resolve the issues to allow this change to take place.”

The stated aim of the UK Government’s proposals is to bring clarity to the travel market, to enable consumers to know with certainty whether their holiday costs are protected in the event of a company, such as an airline, going bust. The Department for Transport says it can’t wait for the European Commission to act on clarifying consumer protection for holidays:

“The European Commission is reviewing the PTD, and a proposal to revise it is expected in 2010. Revising the Directive to make consumer rights clearer would be the best solution to the current lack of clarity. But we cannot be certain if or when that will happen. Consequently we are making our own proposals for revising the UK legislation but are constrained by what is compatible with existing European law and conscious that this may be an interim solution until the Directive is revised.”

But the proposals still exclude flights purchased directly from an airline. The UK government takes the view that this would distort competition with foreign airlines and could be challenged under European law unless achieved through European legislation. There is little prospect of flight-only protection being brought forward, however, as direct purchases from airlines were excluded also from the scope of the European Commission’s consultation on reform of the package travel directive, launched last month. The UK government view is that flight-only are protected through credit card or travel insurance, but this is only the case if the payment is made directly to the airline and not through a third party such as an online travel agent, and normal travel insurance policies do not provide cover for the added costs of getting holidaymakers home if their airline goes bust while they are at their holiday destination.

“The UK’s unilateral move is inconsistent” said Tom Jenkins of ETOA. “If clients booking flights are deemed “protected by insurance or credit card”, why are clients booking other services deemed to be vulnerable? This proposal fails to address the central problem that clients can now book their holidays anywhere. And anywhere includes outside the jurisdiction of the UK. Additional burdens are being imposed on UK business, just as clients are enjoying an increasing freedom to book wherever they choose. I see no brake on people booking foreign holidays abroad.”

The consultation runs until 11 March 2010, and the full document is available online at http://www.dft.gov.uk/consultations/open/regulatingairtransport/consultationdoc.pdf 

The section concerning ATOL reform is Chapter 13 (Part 4).  

NEWS IN BRIEF

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Online Bookings Beat Offline

For the first time, the proportion of holiday trips booked online exceeded those booked without the help of the internet, according to the ITB World Travel Trends Report. The focus of growth is now firmly on trips actually booked (if not paid for) online, which are rising by about 15 per cent a year. The number of people gathering information about their holiday trips, but not actually making a booking, on the internet is still rising, but more slowly.

A similar trend is reported by the latest European Online Travel Report from EyeForTravel, which says that 2008 saw offline sales decreasing while the amount of travel products bought online is steadily rising. Consumers are buying an increasing proportion of travel online and therefore revenues generated online are growing for travel suppliers and online intermediaries. “Growth in online sales has slowed down every year from its more exuberant figures at the start of the decade. In more mature markets, however, its expansion at least continues to exceed the offline market and a clear pattern emerges, whereby the online market is closing in on the offline market,” says the report.