| Summary
Air Travel Organisers' Licensing (ATOL) enables passengers stranded abroad when their air carrier fails to return home, and refunds to be made if ticket holders have yet to travel. ATOL protects UK package holidaymakers but covers a declining proportion of the overall UK travel market. In particular, ATOL does not apply to those growing numbers of UK international leisure travellers who book directly with scheduled air services.
In 1996, 96% of UK international leisure passengers were protected by ATOL. In 2004, 66% enjoyed the protection of ATOL. By 2010 coverage may have fallen to around 20%. Where ATOL does not apply, there are currently no comparable alternative repatriation and refund arrangements. In 2004, over 14 million UK international leisure travellers lacked ATOL protection, up from 5.5 million in 2000.
The Government's decision in October to reject the advice of the industry regulator, the Civil Aviation Authority (CAA), that a modest levy adding £1 to the cost of UK international travellers' tickets, means that millions of holiday makers will remain vulnerable. This is an actual, not a theoretical risk. The collapse of EUjet only a few months ago when thousands of passengers were stranded exposed the current gap in protection.
Many people think, mistakenly, that they are ATOL protected when they fly abroad. The CAA and the travel industry have failed in their attempts to dispel the confusion and misunderstandings over ATOL coverage. There is no evidence that commercial insurance is available to enable travellers to routinely make their own arrangements to guard against air carrier collapse, as the Government believes. 90% of travel insurance policies do not cover air carrier insolvency. The case of EUjet demonstrates that voluntary repatriation arrangements, on which the Government is also relying, cannot offer the firm guarantees travellers need.
The Government believes that relying upon the insurance market, coupled with voluntary arrangements between the airlines, amounts to a policy of adequate protection for passengers from the consequences of airline collapse. We do not.
The CAA's research has confirmed that the option of a levy of £1 on the price of each UK international air traveller's air ticket is the most cost effective option to provide protection. The regulatory burden on the industry of such a levy is likely to be low; the countervailing savings considerable, possibly £80-£100 million.
No one relishes paying more to travel. But there is no practical alternative if millions of UK international leisure travellers are to have peace of mind. The collective advantage of a small additional payment on each ticket far outweighs the modest individual cost. The CAA's evidence is that a considerable number of those who suffered from EUjet's collapse would have been prepared to consider a more extended consumer protection system.
In reaching its decision, the Government has not only rejected comprehensive advice from the CAA and the views of large parts of the industry, but has failed to provide a convincing alternative rationale for its policy. The Government appears to have departed from the important principle that policy should be based clearly on evidence. Instead, we have a policy is founded on assertion. The Government now needs to present the evidence on which its decision was based.
The Government also took far too long to come to its decision. The CAA took more time than it promised to present its final advice to the Government. In 2003, our predecessor committee recommended urgent action to plug the growing gap left by ATOL's progressive decline. A decision was expected within a few months. In 2004, that committee recommended that the CAA's draft advice to the Government, which was in line with their final recommendation, should be acted on quickly. This evidence of drift is deeply disappointing.
Most importantly, the Government needs to rethink its decision, in effect to abandon effective protection for millions of air travellers. We urge it to take the opportunity of this report to do so.
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