Air Travel Organisers' Licensing (ATOL) Reform

Written evidence from TUI Travel plc (ATOL 10)

Introduction

TUI Travel PLC welcomes the steps taken by Department for Transport (DFT) and the Civil Aviation Authority (CAA) to modernise the Air Travel Organisers’ Licensing (ATOL) scheme.  It has become clear that the ATOL Regulations are no longer fit for purpose. The DFT and the CAA are to be applauded for recognising this fact and taking steps to address this important issue. TUI Travel also welcomes the fact that the potential reform of the ATOL scheme may be included in the scope of the Draft Civil Aviation Bill. This is the clearest indication to date that the Government is aware of the travel industry’s key concerns surrounding ATOL reform, namely that the ATOL reform proposals will only be workable if airline holiday sales are also included within ATOL’s scope.

TUI Travel PLC has consistently argued that customers booking holidays should have a consistent level of protection and that businesses selling services that compete directly with one another in the sale of holidays need to be regulated in the same way. 

With regards to future reform of the ATOL scheme, we continue to believe that it is important for airlines selling "Flight Plus" arrangements to be regulated in the same way as any other seller of such arrangements.  The risks to customers are of the same nature whatever the identity of the seller.  We do not believe there is any evidence to support a contention that airlines are less likely to face financial difficulties and insolvency than other sellers of such arrangements.  All airlines should therefore be included in the ATOL scheme. It is a matter of equality of treatment both in terms of customer protection and in terms of fair competition. The presumption, therefore, should be in favour of their inclusion. We see no good reason why airlines should continue to operate outside the ATOL scheme and believe that their exclusion could only be justified based upon strong, objectively justifiable and properly evidenced factors.

We therefore urge the Committee to call on the Government to consider ATOL in the Draft Civil Aviation Bill. This document outlines TUI Travel PLC’s views on the current Government proposals for ATOL reform.

"Flight-Plus" - Booking Timescales

The DFT have proposed a time period of 24 hours between requesting elements of a "Flight-Plus" holiday. We would propose extending this time limit to seven days. We note and understand the reasons behind the proposed definition of "Flight-Plus" and, in particular, the dependence upon the date that the elements are requested. Nonetheless, we are concerned that there may be unscrupulous sellers that will seek to exploit the system by taking options over, say, accommodation, but then not booking it until a date that is two days later than the flight has been booked. Regardless of when the accommodation has been requested, they may then seek to present this is two transactions outside the ATOL regime. We believe that a time limit of seven days would make this type of behaviour much more difficult.

"Flight-Plus" Arranger - Definition

TUI Travel PLC supports the DFT’s definition, in Regulation 23, of a "Flight-Plus" arranger being the business that interacts with the consumer in meeting a request to provide a flight, and also acts to include that flight as part of a "Flight-Plus". In particular, we support the intention of the drafting that all transactions in which customers, in their own terms, would consider to be the purchaser of a "holiday" be included within the scope of the ATOL scheme. We also support the fact that the draft Regulation has not sought to be prescriptive by setting out details of arrangements which might be considered to be "Flight-Plus" which would risk impliedly excluding arrangements which were not so listed.

However, we do have some concerns with regards to the DFT’s proposed changes to the Air Travel Trust (ATT) payment policy. We are specifically concerned that the Trustees of the ATT are considering whether the terms of the deed establishing the ATT and their payment policies should be amended to allow the Air Travel Trust Fund (ATTF) to provide a contribution directly to the "Flight-Plus" arranger to help meet the cost of their obligations under the proposed Regulations for refunds for forward bookings. In relation to the proposals to provide contributions to ATOL holders, we are very concerned that providing this benefit to a selected group of ATOL holders, whilst it is not available to the generality of ATOL holders, is unfair. Existing ATOL holders buying seats on an ATOL to ATOL basis are unable to benefit from the proposed contribution in the event that the first ATOL holder fails. Those existing ATOL holders will effectively be funding, through their APC contributions, the financial advantage that is proposed to be provided to the ATOL holders buying seats on a retail basis.

Micro businesses

We do not believe that micro businesses and start ups should be exempt from the parts of the draft Regulations dealing with "Flight-Plus". Although we understand the general position with regards micro businesses and the desire to mitigate the regulatory burden on those businesses, we believe that the disadvantages are so compelling that the moratorium should be disapplied in this instance.

"Flight-Only" seats

In addition to the reforms to include "Flight-Plus" holidays in ATOL, the draft Regulations also make some changes to the Regulations dealing with the sale of 'Flight-Only' seats under the ATOL scheme. TUI Travel PLC recognises that it is clearly to the benefit of the ATT to limit its liabilities in respect of flight only sales. Our primary concern, however, would be the risk that the consistency of protection under the ATOL scheme will be diluted and that customers will therefore lose confidence in the scheme. The obvious answer would be to exclude "Flight-Only" sales from the ATOL scheme entirely. This would be the logical step that would create "bright lines" in terms of what is protected and what is not protected and we urge the Committee to call on the Government to reconsider this point at the earliest possible opportunity.

"Agent for the Consumer"

Holidays sold on an "agent for the consumer" basis should be brought within the scope of the ATOL scheme. Equivalent levels of protection should be provided to all customers buying what they would consider in their own terms to be a holiday. Just because an agent claims to act as agent for the consumer rather than as agent for the seller should not mean that those customers lose the benefit of protection. It is very straightforward equality of treatment argument.

System Reform

While there is no perfect scheme for administering refunds and repatriations, it is clear from experience that the current system requires improvement. The deficit in the ATTF and the factors that have led to the growth in that deficit are ample evidence that changes are required. For too long, ATOL holders have been paying above market rate for protection, while those outside or on the fringes of the scheme have had a free ride.

It would be unwise to be prescriptive at this early stage about how the Scheme might be reformed, but some guiding principles might be as follows:-

· The role of the CAA should be limited to areas where it can demonstrably add value. The terms of the insurance cover that it is able to access and that covers major failures may be one example since the insurance market will take into account the monitoring and management that the CAA undertakes in assessing that risk.

· Mechanisms should be established for properly assessing the level of risks represented by reference to a) the type of activity undertaken; and b) the financial covenant of the ATOL holder (or its guarantor.) Those risks should be priced accordingly in order to reflect a market approach and to disincentivise high risk behaviour.

· Where market solutions offer the most efficient way of providing the level of coverage required, then ways of facilitating those market solutions should be fostered.

· A comparative study of different European (and beyond) schemes should be carried out with the aim of identifying those that offer the best value for money.

Civil Aviation Bill

TUI Travel PLC note the point made in the Written Statement delivered by the Secretary of State for Transport (23 November 2011) that it is possible the scope of the Draft Civil Aviation Bill may be extended before it is introduced, potentially to include the reform of ATOL. TUI Travel strongly urge the Committee to call on Government to follow through with this suggestion, as the Civil Aviation Bill provides a timely opportunity to address concerns with the current ATOL scheme.

Package Travel Directive

Finally, TUI Travel PLC has engaged closely with the European Commission in relation to its proposed reforms of the Package Travel Directive (PTD). We have informed the Commission that we believe that Option 7 from their proposals should be adopted. In our view, the reforms proposed for the ATOL scheme could provide a model for the type of reforms that are required in relation to the PTD. We would encourage the Committee to call on DFT and BIS to discuss this model with DG MOVE as the basis for the extension of scope of the PTD.

January 2012