Commentary on provisions of Bill
Chapter 1: Policy Background
6 The Bill amends the Secretary of State’s existing powers to regulate the provision of flight accommodation. These powers are the basis of the Air Travel Organisers’ Licence ("ATOL") scheme. The current ATOL scheme, managed by the Civil Aviation Authority ("the CAA"), applies to flight accommodation sold in the United Kingdom. It was set up in the 1970s to protect passengers purchasing seats on flights (mainly where these form part of a package holiday or more recently a "flight-plus" arrangement) in the event of insolvency. It protects over 20 million holiday-makers each year, and is one of the ways in which the United Kingdom provides mandatory protection under the European Package Travel Directive. It is necessary to update the ATOL scheme to respond to innovation in the travel market and to ensure the scheme is harmonised with an updated EU Package Travel Directive (2015), when it comes into force in 2018.
7 The amendments in this Bill will allow ATOL protection to extend to a broader range of holidays, and make it easier for United Kingdom businesses to sell flight arrangements covered by the new regulations seamlessly across Europe. This will enable the United Kingdom to comply with the Package Travel Directive obligations in the short term while retaining an ability to adapt the scheme as appropriate when the United Kingdom leaves the EU.
8 The amendments will also enable the structure of the ATOL scheme to respond more flexibly and effectively to these changes. They will update existing powers to enable separate trust arrangements to be set up for different classes of business model or risk, for example "Linked Travel Arrangements" (a looser combination of travel arrangements than a traditional package, generally booked online). The primary purpose of any new trust will still be consumer protection in relation to the sale of flight accommodation. A further amendment will ensure that the CAA’s information powers are aligned with the evolving ATOL scheme, so that they are able to continue to manage and enforce the scheme effectively.
9 On 28 October 2016, the Department published a consultation document ‘ATOL reform – modernising consumer protection’. https://www.gov.uk/government/consultations/atol-reform-modernising-consumer-protection. This sought views on proposals to strengthen ATOL and align it with the Package Travel Directive (2015), through: ensuring ATOL is consistent with the new definition of "package’’ in the Directive; ensuring ATOL is consistent with the scope of the Directive, so that it can protect all eligible flight sales made by businesses established in the United Kingdom, including sales across the EEA; and potentially amending ATOL to cover emerging business practices regulated under the Directive, including Linked Travel Arrangements.
10 The Government published its response on 9 February 2017 and confirmed its intention to bring forward its proposals. Those proposals requiring primary legislation are provided for in this Bill. The consultation and Government response can be found at: https://www.gov.uk/government/consultations/atol-reform-modernising-consumer-protection
Clause 1: Air travel organisers’ licences
11 This clause amends section 71 of the Civil Aviation Act 1982 ("the 1982 Act") to enable regulations to be made covering the sale of flight accommodation by United Kingdom established organisers, elsewhere in the EEA. The making of such regulations will support the United Kingdom’s implementation of the Package Travel Directive 2015, which will need to be brought into force by July 2018. Once the Directive is in force, any business established in the United Kingdom and licensed under ATOL for sales within scope of the Directive, will no longer need to comply with the different insolvency protection rules of other EEA States, making cross-border trade easier.
12 This clause also inserts new subsection (1E) into section 71 of the 1982 Act to clarify that the Secretary of State may make regulations to exempt any form of flight only arrangement from the ATOL licensing arrangements.
Clause 2: Air Travel Trust
13 The Air Travel Trust is the trust arrangement first established by deed dated 5 January 2004 ("the 2004 deed"), under which contributions from ATOL holders are held and CAA trustees are given powers to compensate consumers. The 2004 deed permits amendment of its provisions by the Secretary of State. This clause amends section 71A of the 1982 Act to distinguish the existing and continuing flexibility of the current Air Travel Trust from wholly new qualifying trusts that may be enabled by subsection (2).
14 Subsection (2) enables the Secretary of State to incorporate, by way of regulations, new forms of qualifying trust into the ATOL trust arrangement. The primary purpose of any new trust will still be consumer protection in relation to the sale of flight accommodation. Since 2004, the market for flight sales has become increasingly diverse. Both CAA experience and feedback from the consultation on modernising ATOL suggests that in future it may be necessary to enter into separate trust arrangements for different classes of business model, for example "Linked Travel Arrangements" . This will give greater transparency for business and consumers, particularly if there are significant differences between the trust arrangements for different classes of consumer or contributor.
15 Subsections (3) and (4) amend section 102 and Schedule 13 of the 1982 Act to provide that the affirmative resolution procedure will apply should the Secretary of State propose to make regulations under the new subsection.
Clause 3: Provision of information
16 This clause amends section 84(1) of the Civil Aviation Act 1982, which sets out the powers under which CAA are able to request information from persons. Subsection (2) of this clause extends the scope of the power to request information to ensure it matches the new scope of the power to make regulations introduced by clause 1. Subsection (3) ensures that the information power applies to any airlines selling ATOL licensable holidays in the United Kingdom (and airlines established in the United Kingdom selling such holidays in the European Economic Area), that are not covered by section 84(1)(a). For example, subsection (3) would apply to European airlines that have an air service operator’s licence from another EU Member State and therefore do not need any of the licenses granted by the CAA mentioned in section 84(1)(a).