UK Civil Aviation Authority launches next stage of ATOL reform

The UK Civil Aviation Authority has today published the emerging findings of its programme for ATOL reform.

The regulator is seeking further information from stakeholders to support its work in finalising its proposals for changes to the ATOL financial protection scheme.

The Civil Aviation Authority, which runs the ATOL scheme, proposed in its first consultation changes that are intended to ensure consistently better protection of consumers’ money by travel businesses and, as a result, improve the financial resilience of the ATOL scheme overall.

It wants to do this alongside continuing to secure the benefits for consumers from a competitive travel market with choice for consumers.

At present, some ATOL protected travel businesses use their customers’ advance payments for their holidays to fund their own operations before customers have travelled. This has been a long-standing practice in the industry, but it may incentivise some businesses not to put in place sufficiently robust financing arrangements to ensure that they can deliver the customer’s holiday.

In this latest update, the UK Civil Aviation Authority provides further detail on how it envisages the options for reform could work in practice, recognising that businesses within the sector have different structures and ways of operating.

The regulator’s request for information does not set a final decision on its preferred option for reform, although it sets out the Civil Aviation Authority’s emerging findings to date. The intention being to facilitate meaningful engagement – and to target the beginning of implementation of the final changes from April 2024.

The Civil Aviation Authority’s update provides stakeholders with further information on:

• The regulator’s progress and next steps.
• How financial segregation options might work in practice and seeking views on these approaches.
• Potential factors that might underpin a future ATOL Protection Contribution (APC)
• Civil Aviation Authority consumer research regarding attitudes to ATOL protection and changes to the scheme.
• Amendments to the scope of the programme requested by government concerning the funding of the Air Travel trust.

Paul Smith, Consumer Director at the UK Civil Aviation Authority, said:

“Our aim is to protect consumers by increasing the financial resilience of both the ATOL scheme and the wider industry, while continuing to see a competitive market with choice for consumers. We have listened to stakeholder feedback and are providing greater clarity regarding our considerations.

“We want to get this right and this provides industry further opportunity to comment on the direction of travel of the reform programme and to assist us in the finalisation of our proposals. We are also working with the UK Government, particularly on proposals that concern the ATOL Protection Contribution paid by consumers.

“That’s why we are seeking people’s views on changing these arrangements to further enhance protection of customers’ money. As we proceed, we will take full account of any changes and allow time for the industry to adjust accordingly.”

The Civil Aviation Authority is asking for comments and feedback on these aspects as it finalises it proposed options for reform in 2023.

The closing date for feedback is 24 March 2023.

Notes to editors

For further information on this consultation, including how to respond, please visit: https://consultations.caa.co.uk/corporate-communications/atol-reform-request-for-further-information

In the event legislation is required, such as changes to the APC, the usual Governmental and Parliamentary Processes would be followed, including the Government being the ultimate decision maker on the final proposals, and Parliament having the opportunity to scrutinise the proposals and draft legislation.