The British Government is consulting on reforms that they think should be made to the current holiday and flight protection scheme in light of recent high profile insolvencies and changes in travel products sold.

The news that UK based travel company Holidays for UK Limited, trading also as Aegean Flights, brings the total number of failed tour operators covered under the Air Travel Organiser’s Licensing (ATOL) to thirteen so far this year (2011).

Last year Turkey was hit with the failure of Goldtrail Holidays, Kiss Airlines and Sun 4 U Holidays that caused the loss of holidays and flight confusion as the CAA struggled to determine which customers were eligible for cover under the ATOL scheme.

Following these insolvencies and other the government is consulting on reforms they think could be made to the ATOL scheme.

Born 1970

All tour operators selling flights and air holiday packages must hold a licence from the Civil Aviation Authority (CAA). If a Licence holder fails, the CAA is responsible for ensuring customers are either repatriated to the UK or receive a refund of payments made.

Repatriation costs and refunds are met by the Air Travel Trust Fund, the funds of which come from a £2.50 per person contribution, called the ATOL Protection Contribution (APC), each licence holder is required to make when it accepts a booking under its ATOL.

The ATOL scheme has been around since 1970. Currently it protects those buying flight inclusive package holidays and certain flights against insolvency of their tour operator.

In 2010 over 190,000 consumers were directly affected by ATOL holder insolvencies. Consumers abroad when the insolvency occurred benefited from the repatriation arrangements provided by the CAA and the remainder, who had made bookings but not yet travelled, are entitled to a refund for their losses.

Significant Changes

But the way holidays are sold has changed significantly since the scheme was first set up and that rate of change has accelerated dramatically since 1997.

In 1997 some 97% of leisure holidays were ATOL protected. But by 2009 that had fallen to 50%.

The absolute number of ATOL protected holidays has also reduced from a peak of 29 million to just under 20 million in 2010.

The government is concerned that the whole subject of cover is now confused and wants to reform the laws to enable consumers to make considered choices when they buy a holiday either as a package or as a DIY package.

Why Reform?

The government has cited recent insolvencies such as XL Airlines in 2008, Sun4U holidays and Goldtrail Holidays that, because of the complicated structures in which they sold flights and holidays, led to confusion and delays in the CAA confirming if consumers were covered.

Their key short term aims are:

1. Bringing ‘Flight-Plus’ into the ATOL scheme where accommodation and flights are included as a supply but not currently covered as they not defined as a ‘package’.

2. That customers who buy from an agent that is not covered by the scheme are made aware of the fact so they can make an informed decision.

3. Replace current arrangements to make the cover under the scheme clearer i.e. by issuing a certificate of cover to customers.

The consultation document covers many other points too and if you are interested you can view them here.

The consultation ends on 15th September 2011.

Source – DFT