Analysis: Delay to Atol reform was not a surprise

Authorities cite complexities and ‘need to ensure we get it right’, Ian Taylor reports

Confirmation of a delay to Atol reform in a joint statement from the CAA and Department for Transport (DfT) on Monday came as no surprise.

CAA head of Atol Michael Budge confirmed a delay to the long-expected reform at an Abta Travel Regulations Conference on November 15. But the fact the joint statement followed two months later gives an indication of what may be holding things up. It’s understood there is frustration at the CAA over the delay.

Three aspects of Monday’s statement are of note. One, it asserted the “strong case” for Atol reform but gave no timeline for this happening.


MoreCAA and DfT assert ‘strong case’ for Atol reform but confirm delay


Two, it attributed the delay to the complexity of “assessing the impacts of the different types of risks posed by Atol holders and the impacts the different options [for reform] could have”, noting “we will need more time to ensure we get it right”.

Three, the statement asserted that a “considerable number” of businesses are still “using customer money”, confirming that segregation of customer payments remains a keystone of the intended reform along with a variable, risk-based Atol Protection Contribution (APC) to replace the current flat rate £2.50.

Senior industry figures have challenged the CAA’s rationale for segregation. Travel Trade Consultancy director Martin Alcock told a Travel Weekly Future of Travel conference last September: “Saying businesses shouldn’t use customer money for working capital makes sense if you’re using customer money to invest. The CAA [has] conflated that with using customer money to buy flights and hotels. To me, that is what it’s there for.”

White Hart Associates head of travel Chris Photi likewise noted: “Most companies use [customer] payments to pay component suppliers, principally airlines, because airlines won’t give you a flight unless it’s prepaid.”

The CAA received 293 responses to its Request for Further Information on reform proposals last January and noted unsurprisingly that “contrasting views on Atol reform” remain, with “many” opposed to a “one-size-fits-all” approach and wanting “flexibility to choose from a number of different mechanisms to protect sales”. This is hardly news.

However, the statement took a firm tone in asserting the case for segregation, stating: “The CAA continues to observe a considerable number of Atol holders using advance customer monies to fund various operational expenditures and this potentially exposes consumers to the risk of not being able to take their holiday.”

It also noted: “While the industry has seen a strong post-pandemic recovery… it has not yet translated into a robust and sustainable improvement in balance sheets across the sector.”

While the rate of Atol failures has been remarkably low post-pandemic, one recent failure – that of Luxtripper in October, which ceased trading owing £9.1 million to customers – appears to fit the CAA narrative.

The uncertainty about the outcome of reform remains.

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