Air Travel Organisers' Licensing (ATOL) Reform

Written evidence from Virgin Atlantic Airways (ATOL 02)

1 Virgin Atlantic is grateful for the opportunity to provide evidence to the Transport Committee in its assessment of the proposed reforms of the ATOL scheme.

2 Virgin Atlantic has previously responded to the DfT’s consultation on ATOL reform. Our key points, which remain the same, were:

· UK airlines operate in international global market and compete with international carriers and should not be competitively disadvantaged.

· Consumers should continue to be allowed choice and freedom without additional cost.

· Regulation should be fair and proportionate to the problem.

· Consumers should be clear about when they are covered. The many tiers proposed do not serve this purpose.

3 ‘Flight Plus’

3.1 Virgin Atlantic was pleased to be able to assist the DfT in its preparations for the Bill, by responding to supplementary queries regarding Virgin Atlantic ancillary sales.

3.2 Virgin Atlantic has a number of ways in which customers can buy flight tickets; directly via our Contact Centres, through our website and we also sell tickets through travel agents including Virgin Holidays. These agents are covered by IATA, ABTA and ATOL regulations.

3.3 Our Contact Centre can offer the option to ‘add on’ car hire to a flight and this is invoiced separately to the customer. Our website offers accommodation and car hire through Virgin Holidays. This is invoiced separately from the flight booking.

4 We remain concerned that, rather than providing clarity, these reforms actually make it difficult to understand the potential impact on our customers and our business. We have a number of questions which should be answered before this Bill is enacted, regarding the logistical implementation and scope of the proposals.

4.1 Notwithstanding the significant technical challenges associated with recording when a ‘flight plus’ booking was created, we assume that we would need a process whereby we advised the passenger what that actually meant for them. For those passengers to whom we had offered car hire at the time of the call, would we need to advise them if they add the car hire on but outside the ‘day’ timescale that they would then not be covered by ATOL? Could passengers perceive this as sales pressure rather than advice?

4.2 Could the £2.50 APC (ATOL Protection Contribution) drive booking behaviour by encouraging consumers to book ancillary products outside of the ‘day’ timescale window, thus avoiding the aims of the reform proposal?

5 The DfT consultation document (4.6) states that the Government will introduce ‘flight plus’ into the scheme through secondary legislation but that airlines sales would require primary legislation. What would the potential timescales be on this?

5.1 As enabling powers have been added to the Civil Aviation Bill, how far in remit and enforcement authority would this go?  

5.2 If all airlines’ ‘flight plus’ are to be included in the scheme, how will this extend to non UK airlines?  It is perhaps less common for a UK consumer to make a package holiday booking through a non UK travel agent but they are highly likely to book over the internet a flight with a non UK airline which also offers hotels and car hire. To omit these carriers would not only place UK carriers and tour operators at a distinct competitive disadvantage but would also be very confusing and unfair for the consumer, undermining the aim of the reform. 

 

6 ‘Right to Fly’

6.1 Virgin Atlantic has worked with the CAA on the proposed reforms of ‘right to fly/specified operator’ to help understand the detail in order to identify practicable solutions. Despite working through the various distribution channels with the CAA and other stakeholders, this element of reform has prompted many further questions and potential issues. These would need to be fully explored with all stakeholders before any decisions are taken.

6.2 It would be useful to understand the rationale and impact assessments that have justified this element of reform. As a regulated airline Virgin Atlantic issues tickets directly to consumers and allows IATA agents to issue tickets. We are not familiar with any occasions when passengers are denied travel once they hold a booking and ticket to fly. The scenario where a customer has paid in full to an ‘agent’ but does not have a booking or ticket inside agreed and regulated timescales would appear to enter a grey ‘fraudulent’ marketplace. Airlines are not the appropriate authority to police this.

6.3 We advised the CAA that we also found the language of ‘right to fly’ potentially misleading, as carriers must protect the ‘right’ to deny a passenger carriage for reasons of Visa or Passport issues or security reasons, for example a passenger who may be intoxicated or abusive.

7 We welcome the DfT recognised the need to take time to gather all available data on the decision making process. We hope that this measured approach will take into account all of the details in order to achieve the objective of making matters clearer for the consumer. Given the damaging impact of the rise in APD and the fragile recovery of the industry, it is important to strike the right balance between protecting consumers and the businesses that they ultimately use in order to travel.

8 The ATOL scheme was created in order to provide customers with the assurance that they are able to book and secure their holiday in advance; often paying in instalments to their travel agent; safe in the knowledge that they would get their money back should the agent fail. It also gave them the assurance that they would not be stranded when on holiday should the same thing happen.

9 The DfT has recognised that the way in which customers now travel has changed and protection is delivered through a number of channels such as the direct purchase of an airline ticket, travel or home insurance, or credit card cover. All of these could be viewed as delivering the Governments ‘Red Tape Challenge’ to help free-up businesses, encourage greater personal responsibility.

10 We question whether the draft proposals are compatible with the Coalition Government's regulation strategy of:

· removing or simplifying existing regulations that unnecessarily impede growth;

· reducing the overall volume of new regulation by introducing regulation only as a last resort; 

· improving the quality of any remaining new regulation; and

· Moving to less onerous and less bureaucratic enforcement regimes where inspections are targeted and risk-based.

The proposals increase the scope of existing regulation rather than reducing it, they add complexity rather than offer simplification, and it is not clear whether any non-regulatory solutions have been considered.

11 It is important that consumers are better informed and a creative modern solution needs to be proposed rather than further regulation and paperwork in an attempt to bridge gaps in existing provisions.

January 2012