A series of new financial assessments for all existing and new standard and small business ATOL holders, will come into effect on June 1, 2016.

The changes will ensure that all ATOL holders are subject to robust financial tests and are designed to extend the CAA's risk-based approach to licensing.

The new assessments comprise a set of financial ratios that are weighted and then combined to produce an overall assessment of the company's financial position, based on data taken from its year-end accounts. This will inform the CAA's licensing decisions.

To help travel companies prepare for the changes, they will be able to access a newly designed online self-assessment tool, which can be completed in advance of their application and submitted to the CAA, which will then indicate whether they have met the financial test.

Key changes from June 1, 2016

  • New financial assessments for Small Business ATOL holders, which involves a set of four ratios
  • New financial assessments for Standard ATOL holders, which involves a set of seven ratios
  • New financial self-assessment tool, submitted online.
  • Assessment burden reduced for firms licensed for between £5m and £20m. (There will be not be any change in assessment for the largest ATOL holders - those with revenues of more than £20 million)

The new tests have been developed with a leading international credit rating organisation and a professional services firm with expertise in the travel sector, and follow the CAA's 'Rebalancing ATOL' consultation, which was aimed at improving the financial reporting arrangements of all ATOL holders.

Head of ATOL, Andy Cohen, said: “The existing tests have been in place for more than 30 years and needed updating to reflect modern risk-based methods for financially assessing the likelihood of business failure.

“In bringing in these changes, our primary objective, is to reduce the risk of travel company failure and the subsequent impact and disruption to passengers.

“The new financial assessments will mean we are better placed to properly identify, in advance, those companies that are in, or at risk of financial trouble, improving the outcome for consumers.”

The CAA understands that some businesses not previously subject to a financial assessment may be concerned about the new test.

Andy Cohen added: “If an existing ATOL holder would like to know whether they meet the new criteria, ahead of their renewal, they can send us a self-assessment form online.

“We will review the information submitted and then tell the ATOL holder whether they would pass the new assessment or what improvement(s) are required in order to pass. We will be communicating with ATOL holders about how to do this.”

For more information on the changes that will be effective from June 1, 2016, read our policy note.

Notes to Editors

  1. The Civil Aviation Authority (CAA) is the UK's specialist aviation regulator. Its regulatory activities range from making sure that the aviation industry meets the highest technical and operational safety standards to preventing holidaymakers from being stranded abroad or losing money because of tour operator insolvency
  2. One of the CAA's principal responsibilities is to manage the Air Travel Organisers' Licensing (ATOL) scheme, which provides protection to holidaymakers from being stranded abroad or losing money when purchasing air holidays and flights from licensed tour operators. If an ATOL holder fails, the CAA is responsible for ensuring customers are either repatriated back to the UK or receive a refund of payments made.
  3. The ATOL scheme covers the traditional package holiday, some individual flights and holidays known by the industry as 'Flight-Plus'. A 'Flight-Plus' booking is one that includes a flight plus accommodation and/or car hire, so long as these separate parts of the holiday are requested within a day of each other.
  4. The Air Travel Trust (ATT) is the primary source of funding when an ATOL holder fails. It is administered on behalf of the ATT by the Civil Aviation Authority (CAA).