02 Feb

ATOL reform ignores reform of Package Travel Regulations – Why? Asks ABTA

This column was first published in Travel Weekly on 2 February 2023.

With the CAA now having published its updated thinking on ATOL reform and seeking industry input, it’s time for ABTA to once again ask a very familiar question – why is the UK travel industry subject to such a complicated regulatory framework? Two sets of regulations, two Government departments, at least three different enforcement bodies, payment card chargebacks. All seeking to solve one problem.

We know broadly the options in play for future protection of travel customer monies: bonding, segregation of customer monies, and financial failure insurance, and, perhaps, a mix of these solutions. That remains the case whether or not the holidays include flights. With reviews of both sets of regulations under way at the same time, it seems a bizarre process; those currently responsible for each system are not exploring options together to reduce burdens on businesses, remove duplication and create a system that is easier to understand and delivers better results for all concerned – including for consumers. 

It is becoming clearer that some form of enforced segregation of customer monies is front of mind in relation to ATOL – a point that was expressed by the Aviation Minister, Baroness Vere, at ABTA’s Travel Matters conference back in December. Introducing mandatory segregation for all travel businesses would undoubtedly be a fundamental change, forcing businesses to adapt their business models and potentially to seek additional funding (depending on the level of segregation required). 

Yet it would be extraordinary to even consider introducing such a significant change without any thought for the work already being done elsewhere in Government on the Package Travel Regulations, which are also due to be reviewed this year. ABTA is strongly urging all sides – the CAA, Department for Transport (DfT), and Department for Business, Energy, and Industrial Strategy (BEIS), to work together to deliver a cohesive approach across both regimes.

Elsewhere, the CAA has come in for criticism in some quarters around timings and the fact that this isn’t the full second-stage consultation originally promised. We understand those frustrations. However, the industry is emerging from the most serious threat it has ever faced. It seems entirely reasonable – before making proposals which could change the travel landscape dramatically – for the regulator to want to test again some of the feedback they received in summer 2021. 

For example, we know at that time companies were finding it extremely difficult to renew or obtain bonds, with many facing huge increases in premiums to meet their regulatory obligations. That will almost certainly have swayed the view of many respondents around the suitability or desirability of bonding as a future option. Yet, feedback we have received from many travel businesses is that they continue to have a clear preference for bonding over other protection mechanisms. 

ABTA will be urging the Government to get this right, this time.  We have already reconvened our financial protection focus groups, which will bring together the industry and financial service providers to debate the future of financial protection and how we can ensure a more seamless, coordinated approach to protecting consumer monies. We will also be discussing the CAA’s paper in depth with our standing policy committees and engaging with all ABTA members through conference calls and other mechanisms. 

There are plenty of significant topics to chew over, including segregation, variable APC, the treatment of integrated airline groups, and whether it is appropriate for the CAA to force businesses into certain ownership or business models. We look forward to what will surely be a lively debate over the coming weeks – but two things remain clear. Firstly, we must retain flexibility within the financial protection system. One size simply doesn’t fit all. Secondly, we have a valuable opportunity ahead of us to remove complexity and make things easier for all businesses involved in the travel industry – we must seize it.

•    ATOL reform and Package Travel Regulations will be explored at ABTA’s upcoming Travel Finance and Travel Law conferences.

Luke Petherbridge, Director of Public Affairs at ABTA – The Travel Association