COMMENT: Holiday Package Protection
The CAA has confirmed that its consultation on the future financial protection for holidays sold in the UK has ended and that it is now assessing responses from the travel industry and consumer organisations. The main UK protection system, Air Travel Operators' Licensing (ATOL), has been in place for over 30 years and recently there have been significant market changes, with an increasing number of consumers buying flights and accommodation direct from airlines and hotels over the Internet. As a consequence, the proportion of holidays that are protected has reduced, and research shows that the public do not understand where protection applies.
The CAA”s consultation sought views on how and to what extent consumers should continue to be protected against the collapse of travel firms, and whether the scope of ATOL and the current method of providing protection are still appropriate. There is no equivalent scheme covering sales made directly by airlines.
The ATOL scheme is managed by the CAA and gives comprehensive protection from losing money or being stranded abroad to people in the UK who buy air holidays and flights from tour operators each year. It is by far the largest travel protection scheme in the UK, and the only one for flights and air holidays sold by tour operators.
All tour operators selling flights and air holidays must hold a licence from the CAA. Before it gets a licence each operator is examined to ensure it is properly managed and financially sound, and it must lodge a bond ” a financial guarantee provided by a bank or insurance company. If it fails, the CAA then uses the money to pay for people abroad to continue their holidays and to travel home as planned, and to make refunds to those who have paid but not travelled. If the bond is insufficient any shortfall is met by the Air Travel Trust Fund, which is managed by the CAA and backs up individual bonds.
Over the past 17 years, ATOL has managed over 300 tour operator failures, rescuing almost 190,000 people from being stranded and giving refunds to more than a million others at a total cost of ”160m. In the year to March 2003, 3,900 people were rescued or refunded at a cost of ”1.3m.
Most passengers carried on charter airlines buy their tickets through tour operators and are protected by ATOL. Passengers carried on scheduled airlines or no frills carriers are for the most part only protected by their own insurance and indemnities offered by their credit card supplier unless they buy their seat, perhaps as part of the package, from an ATOL holder. (see ABTN 1 September for an explanation) More and more airlines are offering hotel, transfer, insurance and services on what could be construed as holiday packages.
Helen Simpson, the current Director of the CAA”s Consumer Protection Group (she retires next July), has summed it up very clearly. ”In general people who commented want to see an effective protection system and many want to see it expanded to holidays and travel that are currently outside ATOL ” particularly where air seats are sold with other holiday facilities. There”s also a demand for a simple system that can be easily understood by the public”.
”We”d always known that there would be no simple solution to providing protection in an increasingly complex market, and there are still some significant challenges about getting the balance right.”
BMI, to its great credit, was the only scheduled airline to respond and pointed out that the whole consultation could be overtaken by European legislation. The CAA says that they will be analysing the responses carefully and making recommendations to Government. The organisation says that it hopes to publish this advice in the first half of 2004. Not before time.
Responses to the consultation can be viewed on http://www.atol.org.uk