Background to reform
Last year the UK Civil Aviation Authority (CAA) published a Request for Further Information (RFFI). In the RFFI, the CAA set out its emerging findings for ATOL reform and sought views from stakeholders to help further develop proposals. In total, 293 responses were received from a range of stakeholders.
Responses to the RFFI demonstrated that there are contrasting views on ATOL reform. Many respondents expressed that a “one-size-fits-all” approach would not work well given the variety of businesses the scheme covers. Many respondents also felt that reforms need to be proportionate to the nature and scale of the risk ATOL holders present, and that there should be flexibility for ATOL to choose from a number of different mechanisms to protect their sales.
There was broad support for the CAA continuing its risk-based approach to licensing, where the CAA intervenes on a case-by-case basis to address the financial risks posed by ATOL holders. There was also support for changes to the structure of the ATOL Protection Contribution (APC), with some calling for a transparent and simple APC that would allow for a lower APC to businesses that put in place voluntary risk mitigations.
While the industry has seen a strong post-pandemic recovery in bookings and this has improved the financial position of many operators, it has not yet translated into a robust and sustainable improvement in balance sheets across the sector. 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 as planned. Furthermore, the current flat rate of APC does not take account of the risk that individual ATOL holders or the value of their bookings pose.
We believe that there remains a strong case to reform the ATOL scheme to tackle these issues and to support a scheme that remains fit for purpose, and which incentivises companies to lower their risk of failure for the ultimate benefit of consumers.
The CAA and the Department for Transport (DfT) have been considering the evidence received from stakeholders and are working jointly towards determining a preferred outcome. In doing so, we are assessing the impacts of the different types of risks posed by ATOL holders, and the impacts that the different options could have across the sector. This work is complex and has taken longer than initially expected, and we will need more time to ensure we get it right. Therefore we were not able to consult on final proposals at the end of 2023 as originally planned, although the expectation remains that the next consultation will be a joint one between the DfT and the CAA.