Consultation: Modernising ATOL - PTD 2015

On 23 February 2018, the Department for Transport (“DfT”) and the Civil Aviation Authority (“CAA”) published a one month consultation on proposed changes to ATOL to implement the Package Travel Directive 2015 (“New PTD”) on 1 July 2018.  

The ATOL Regulations 2012 to be amended

The ATOL Regulations 2012 are to be amended. Those that “make available flight accommodation” in the UK must obtain a licence from the CAA unless they are an airline or exempted. The definition of a package has been significantly broadened to include most flight-plus bookings with flight-plus deleted from ATOL.

The ATOL exemption for flight-only ticket fully paid sales will now apply regardless of how the airline is paid so long as the airline is paid in full and the customer receives a confirmed ticket at the time the consumer makes the booking and pays the travel company. This has the same effect as the consumer buying the ticket directly.

Linked travel arrangements outside ATOL

Linked Travel Arrangements (“LTAs”) including flight requiring financial protection (“Flight LTAs”) will be for the Department for Business, Energy & Industrial Strategy (“BEIS”) to deal with in the new Package Travel Regulations 2018 (“PTR”) to be laid before Parliament after Easter. 

Flight LTAs will be outside the ATOL scheme and dealt with in the PTRs with a lower level protection for LTAs by taking out a bond, insurance or through using a trust account.  They will be overseen by local trading standards departments and not the CAA.

The New PTD is a “maximum harmonisation” directive which means the Government cannot overcome the mismatch been ATOL and LTA protection where:

  • ATOL provides refund and repatriation protection against the risk of the ATOL holder’s insolvency up until the flight takes place
  • Flight LTAs provide refund protection for the period of time the travel company is holding the customer’s money. 

Rhys Griffiths, Partner and Head of Travel at Fieldfisher says to confuse matters, a travel company will need to provide split-protection for the customer for a Flight LTA with multiple components (e.g. flight and hotel). The flight covered by ATOL, and the hotel covered by one of the PTR options leading to more complication with compliance and confusion for the consumer. There is no option for travel companies to provide the lower-level protection contemplated by the New PTD.

Rhys says it is questionable whether this arrangement complies with the “maximum harmonisation” requirements of the New PTD.

Cross-border sales

An organiser selling packages may use the insolvency protection arrangements of its place of establishment to cover all its EEA-wide sales instead of the current requirement to comply with the insolvency protection rules of each place of sale. UK-based travel companies will be able to use ATOL to cover flight-inclusive package sales throughout the EEA.

It is not clear whether an organiser could opt to take out insolvency protection in the place of sale if it prefers that option especially when certain insolvency protection schemes (such as ATOL) have strong brand value in the local market and so an EEA (non-UK) travel company may want to obtain an ATOL.

The proposals allow EEA (non-UK) established travel companies to sell into the UK using the PTR options (i.e. bonding, insurance and a trust account).  Only UK based organisers will be allowed to apply for an ATOL, although non-UK travel companies may challenge this arrangement as EU law prohibits a regulator from discriminating against companies on the basis of nationality.

Non-UK travel companies may decide whether to comply with the insolvency protection rules of the place of establishment or the place of sale.  UK-based travel companies will not and will have to include all EEA sales of flight-inclusive packages within the ATOL scheme.  This may be inconsistent, but ultimately the administrative convenience of using ATOL to cover all EEA sales may outweigh the lack of flexibility for UK-based travel companies.

Extension of the ATOL scheme to facilitators

Those procuring flights as an agent for the consumer are to be licenced coupled with an extension of the ATOL Regulations to any company which “facilitates” the making available of flight accommodation by another person (the “Flight Supplier”).  The concept of facilitation is very broad and covers:

  • receiving and passing on in whole / part the customer’s money to the Flight Supplier;
  • arranging for customers to make a payment directly to the Flight Supplier;
  • receiving payment from Flight Suppliers as a consequence of the flight booking. This is likely to capture the cost per acquisition pricing model used by some intermediaries which do no more than advertise. This has the potential to bring within the scope of the ATOL Regulations a number of new business models.

ATOL Certificates

The CAA will issue ATOL certificates and not the travel company using real time data. It will not be something which is implemented alongside the New PTD although the CAA say they have tested the capability with 270 ATOL Holders.

New enforcement powers for the CAA

In addition to having the power to bring criminal prosecutions and to revoke, suspend or amend an ATOL, the CAA will have the power to impose variable monetary penalties, stop notices and undertakings (amongst other sanctions).

I am sure the reader will have noted that I have not mentioned the “B” word & Implementation period!