ATOL reform consultation launched by UK Government
On 23 June 2011, the Department for Transport
launched its consultation on its proposed ATOL reforms. The
consultation follows an announcement in February 2011 by Theresa
Villiers, Minister for Transport and Aviation, that the
Government would look to extend consumer protection in the event of
the insolvency of a travel company.
While the consultation document purports to
consult on a wide range of issues surrounding ATOL, for the most
part it contains few surprises and reflects the Government's
earlier statement that it would focus on three key reforms.
- A new category of 'Flight Plus' holidays will be created under
the ATOL scheme. The consultation document and draft
regulations provide further detail as to how a 'Flight Plus'
holiday would be defined.
- Changes to the documentation issued to consumers so that they
are clear when they have booked an ATOL protected holiday.
These proposals include standardisation of the documentation issued
at the point of booking an ATOL protected holiday.
- Improved information for consumers at the point of
booking. The consultation emphasises the need for better
consumer protection and information at the point of booking a
holiday. This is seen to be a particular issue where the
travel agent acts as an agent for the consumer. This involves
the travel agent buying the holiday on behalf of the consumer
rather than selling it to them. Such holidays currently fall
outside the ATOL scheme but it is not always clear that this is the
case to the consumer.
'Flight Plus' holidays
One of the most interesting developments is
the proposed definition of a 'Flight Plus' holiday. A 'Flight
Plus' holiday will exist where the consumer books a flight out of
the UK, or an inbound flight into the UK where the outbound trip
was not by air and where, under the same contract, hotel or other
accommodation and/or car hire are also provided outside of the
UK. Importantly, the other tourist services must be supplied
under the same contract or in connection with the contract for
provision of the flight.
Where there is no overnight accommodation, for
example, where the 'Flight Plus' arrangement includes a flight and
car hire, the arrangements must cover a period of more than 24
hours.
For there to be a 'Flight Plus' holiday the
various elements must be requested by the consumer the day
before, the same day or the day after the flight was
requested. The requirement for the other service to be
requested is critical under the definition of 'Flight
Plus'. This aims to prevent travel companies from
circumventing the requirement for ATOL protection by booking the
various elements outside of the 24 hour period required by the
proposed regulations. The emphasis is therefore put on when
the consumer requests the various elements of the holiday to be
booked and not when they are actually booked.
Through the consultation document, the
Department for Transport recognises that there are currently
reforms afoot at EU level to the Package Travel Regulations and the
Denied Boarding Regulations. It is possible that the UK
Government's proposals will lead the way on extending protection to
the other areas currently covered by the Package Travel
Regulations, notably liability for poor performance of the holiday
contract. This will certainly be the case if the definition
of 'Flight Plus' is seen to adequately capture the majority of
dynamic packages currently offered for sale and which presently
fall outside of the scope of the Package Travel Regulations.
do the proposals go far enough?
While the consultation document requests the
views of stakeholders on the inclusion of agent for consumer
booking under the ATOL scheme and also looks at proposals to bring
airlines selling package or 'Flight Plus' holidays within the ATOL
scheme, the Government recognises that this will require primary
legislation. It is likely that the proposals will come up
against fierce resistance from those operating in the airline
industry. This is because there are strong arguments that
airlines already offer adequate protection for consumers in the
event of travel company failure/insolvency by arranging the
holidays they sell through subsidiaries that already hold an
ATOL.
So-called click-through sales encouraged by
airlines are considered a problem area. They do not currently
fall into the proposed reforms, even though the booking
circumstances largely reflect the 'Flight Plus' arrangements.
Some argue this creates an unlevel playing field amongst
competitors in the travel industry, raising concerns the
regulations could be anti-competitive.
The Government has set an ambitious timetable
and intends to bring the draft regulations into force by the
beginning of 2012, in time for the peak booking season of
2012. It argues that a further six million holidays a year
are likely to be better protected in the event of a travel
company's collapse through its proposed reforms.
