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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.

This is a simplification of the law and, should you be faced with an issue following an accident out of your home jurisdiction, always make sure you have good advice from someone experienced in this area of law.

For further information, please contact Daniel Scognamiglio in the Travel team in Southampton at daniel.scognamiglio@bllaw.co.uk or call him on 023 8085 7339.

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