implications of changes in the ATOL scheme for tour operators
and holiday companies
Travel companies can prepare with more
certainty after the Coalition Government has unveiled its plans to
increase protection for holidaymakers under the ATOL insurance
scheme. The proposals follow a lengthy consultation which was
started by the previous Government in 2009.
Theresa Villiers' written statement on 3
February 2011 set out three key reforms:
- A new category of 'flight plus' holiday will be created under
the ATOL scheme. This would cover holidays including a flight
where the various elements were purchased within a specified short
time period, and so look similar to package holidays, but are not
packages in the traditional sense.
- Improvements in the information provided to consumers at the
time of booking. The new rules will require travel agents to
make it clear when ATOL protection will not apply.
- Standardised booking documentation so it is clear to consumers
whether their holiday has ATOL protection.
None of this will come as a surprise to those
operating in the travel industry. In recent times, following
the collapse of a number of high profile travel companies, there
has been increasing pressure to extend consumer protection when it
comes to holiday bookings.
Where a travel company does not currently hold
an ATOL, the 'flight plus' scheme could have a big impact on
business. Unless the rules for first time ATOL applicants are
relaxed, those applying will be forced to provide a bond for a
minimum of four years. The bond must be to the value of
£40,000 or 15% of the company's annual turnover. Of course,
this will not be of major concern to the larger operators in the
sector but it will affect smaller travel agents who previously
never had to worry about ATOL bonding or protection. We await
further detail on when exactly the 'flight plus' requirement will
Booking scripts and any standard website or
brochure terms and conditions will need to be amended so it is
clear whether ATOL protection will apply to a booking. Travel
companies will also need to ensure that robust processes are in
place so that a consumer is left with no doubt in their mind when a
booking is not ATOL protected.
Many travel companies already use standardised
booking documentation across their brands. It is likely that,
further to the Government's consultation, the standard 'ATOL
protected holiday' documentation will largely reflect what is
already in use, albeit in a uniform format. Travel companies
will, however, need to update their systems and IT to incorporate
While the changes are being heralded as a
welcome extension of consumer protection by many, they will
inevitably encroach on the innovative way in which travel companies
have sought to avoid the need to hold an ATOL or fall into the
remit of selling a regulated package holiday. The boom in
internet holiday sales and the websites which form the backdrop for
such bookings have evolved to provide the ultimate in customer
choice. At the same time, financial protection for holidaymakers
has quickly fallen behind.
Travel Republic successfully argued they do
not need to hold an ATOL licence as they do not sell package
holidays. Where they do sell package holidays they will do so
as agent for one of the major tour operators. Travel companies
that operate using a similar model will not, however, escape the
'flight plus' provisions unless they choose to only deal with
There will now be a short period of
consultation with interested parties before the proposed changes
become law. The proposed changes to the ATOL scheme do not
affect tour operator/ travel company liability for the performance
of the holiday contract, but it is only a matter of time before the
consumer benefits from increased protection here too. The
Government's plans come at a time when the European Commission is
considering changes to the Package Travel, Package Holidays and
Package Tours Regulations 1992.
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 firstname.lastname@example.org
or call him on 023 8085 7339.