EU - Transport Policy

Supplementary written evidence from the Department for Transport (EU 20a)

Following from our discussion at the Committee hearing last week, I am writing to let you know that this morning I have announced the Government’s ‘in principle’ decision to reform the Air Travel Organisers’ Licensing (ATOL) scheme. Our aims are to improve consumer protection, ensure that those booking holidays have greater clarity about which holidays are protected, and to secure the sustainability of the scheme’s finances.

As you will be aware, new ways of selling holidays, and a recent Court ruling, mean it can now be very difficult for consumers and the travel industry to know when they are protected by ATOL and when they are not. The proportion of holidays with ATOL protection has fallen, and the scheme no longer fulfils its intended purpose.

The Air Travel Trust Fund (ATTF), which provides the money for refunds and repatriations when an ATOL licensed company becomes insolvent, is currently operating at a deficit. This is a result of significant travel company failures in 2008 and 2010, combined with a lack of income for a number of years.

The Fund is only able to meet its obligations because of a Government guarantee, which is currently £42 million. It is important to restore the sustainability of the fund so that it can continue to provide financial protection for consumers, while reducing and eventually removing taxpayers’ exposure.

The attached Written Ministerial Statement outlines the proposed reforms. A consultation on the details of the proposals, including draft secondary legislation, is planned for the spring, with the aim of implementation by late 2011 or early 2012.

February 2011