Conclusions and recommendations
Short-term reform
1. The
Government has not clearly based it reforms to the ATOL scheme
on evidence from consumers. We recommend that the Government undertakes
research into consumer awareness of the consequences to holidaymakers
of a failure by their airline or tour operator, the consumer protection
options available to them, and their views on whether and in what
ways the ATOL scheme should be extended. The results should be
used to inform the consultation on further ATOL reform that is
intended to follow the passage of the Civil Aviation Bill. (Paragraph
14)
2. We welcome the
ATOL protection that Flight Plus will provide for a significant
additional number of holidaymakers. However, the failure of the
Government to demonstrate that it has based these reforms on evidence
of consumer views, leaves it open to the accusation that it is
primarily concerned about reducing the deficit in the Air Travel
Trust Fund. The Government needs to address this issue. (Paragraph
22)
3. We recommend that
the Government monitors the first year of operation of Flight
Plus, particularly in terms of the number of Flight Plus bookings
made, the extent to which companies seek to circumvent it, its
impact on consumer costs and the views of consumers towards it.
This information should be provided as part of the consultation
on further ATOL reform that is intended to follow the passage
of the Civil Aviation Bill. (Paragraph 23)
4. We recommend that
the Government and CAA work with the airlines, the travel industry
and consumers to develop a code of practice on information for
consumers making overseas holiday or travel bookings. All consumers
booking an overseas flight that is not ATOL protected should be
provided with information outlining the potential consequences
to the consumer of airline insolvency, the extent of any cover
provided and the options available to consumers to protect themselves
against such risks. This should include a link to more detailed
information, to be provided on the CAA website. (Paragraph 27)
Long-term reform
5. The
Government's long-term reform objectives seem to involve modifications
and extension of the existing ATOL scheme rather than a comprehensive
review of the issues and options. In our view, there are two purposes
of the ATOL scheme which have not been sufficiently disentangled.
ATOL provides protection for the consumer's holiday and an assurance
that the holidaymaker will not be stranded abroad. Consumer protection
is essentially a private matter, though subject to the EU Package
Travel Directive; repatriation of UK citizens involves the passenger
and the state. In devising future schemes, we recommend that the
Government should distinguish more clearly between these two issues.
(Paragraph 30)
6. We welcome the
inclusion of provisions in the Civil Aviation Bill to bring holiday
sales by airlines and agents for the consumer within the ATOL
scheme. It is an anomaly that one type of company should be required
to provide ATOL protection while another type of company, selling
the same product, is not. This will help to create consistency
for consumers and a more level playing field for the industry.
However, extending the ATOL protection to holiday sales by airlines
does not mean that flight-only sales by airlines should be brought
within the ATOL scheme. (Paragraph 33)
7. The Government
has said that it does not intend to bring flight-only sales by
airlines within the ATOL scheme, and cannot do so under EU law.
The risks—admittedly small—to individuals and to the
Government of passengers being stranded abroad if an airline fails
will therefore remain. We recommend that the Government, in collaboration
with the CAA and the airline industry, work towards simpler but
more comprehensive arrangements that minimise the Government's
liability and provide clear choices for the individual. These
arrangements should be based on the following principles:
- explicit choices for consumers to opt in or out
of repatriation cover;
- based on evidence of consumer preferences and
needs;
- clear information for consumers, and
- industry-designed and funded.
If EU legislation is a barrier, the Government should
use its involvement in reform of the EU Package Travel Directive
to press for necessary changes. (Paragraph 37)
8. It is unfair that
those consumers booking a short, low-cost package pay the same
ATOL Protection Contribution (currently £2.50 per passenger)
as those booking an extensive luxury holiday. We recommend that
the level of ATOL Protection Contribution be made broadly proportionate
to the value of the booking. (Paragraph 38)
9. We recommend that
the Government proceeds as soon as possible to develop an industry-financed
ATOL scheme. This should take account of the twin requirements
of protection for consumers and for the taxpayer. It should be
overseen by the CAA with the travel industry playing a substantial
role in the design and operation of the scheme. The scheme must
ensure that costs are allocated fairly across the industry, according
to risk and benefits, without undue cross subsidy. (Paragraph
41)
An efficient and equitable scheme
10. Ultimately
the acceptability of ATOL comes down to money: who pays and how
much. A number of the firms currently outside the ATOL scheme
believe that they are being brought in to bail out a scheme that
has got into trouble through no fault of theirs. If the costs
of ATOL cover can be reduced to the 2008 level of £1.00 per
passenger, many of the objections from the travel industry to
its wider application will probably subside. However, if it remains
at the present level of £2.50 the arguments will continue.
The efficient and equitable operation of the scheme by the Government
and the CAA is therefore critical. (Paragraph 46)
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