Key issues Airport capacity, APD, Atol and VAT


deficit target – making tax cuts unlikely. Indeed, economists warned an incoming government would be compelled to raise taxes. Against this background, former Labour transport minister Jim Fitzpatrick told the Abta Travel Matters conference in June: “You have not won the argument [on APD].”


Air passenger rights Airlines’ disquiet at the European Commission’s Regulation 261/2004 on air passenger rights was not diminished by two decisions of the Court of Appeal in June. In the case of Jet2 v Huzar, the court


ruled technical problems with an aircraft, such as component failure, could not be considered “extraordinary circumstances” in the event of a flight delay of more than three hours and airlines should pay compensation to passengers. In the case of Thomson v Dawson, the court confirmed passengers could press claims for such delays going back six years. The Supreme Court subsequently refused


both carriers permission to appeal and the CAA issued instructions that “airlines should not continue to put claims on hold”. At least one firm pursuing claims on behalf of passengers suggested “billions” could be available in compensation while simultaneously arguing any impact on fares would be minimal.


Atol reform and the Package Travel Directive Reform of the Package Travel Directive (PTD) moved at a snail’s pace owing to European elections in May which meant no progress between April and October. The reform proposals were wending their way through a committee of the Council of Ministers as this report was published, with the best hope being that a new draft directive would appear sometime in 2015. Meantime, the CAA weighed in with a fresh round of Atol reform, unveiling


38 | Travel Weekly Insight Annual Report 2014


There is no reason why an agent should not be able to fix its own commission


plans to toughen financial criteria for most Atol-holders and abolish the Small Business Atol. Abta came out strongly against a number of the changes and the CAA was considering industry responses to a consultation as this report appeared. The changes, albeit with modifications, were due to come in from April 2015.


VAT Two rulings on VAT brought clarity and confusion in almost equal measure. In January, HM Revenue and Customs (HMRC) confirmed it had no plans to change the Tour Operators’ Margin Scheme (Toms) despite a European court ruling in September 2013 which threatened to extend the scheme’s application to ‘wholesale suppliers’. In March, the UK Supreme Court ruled in


favour of bed bank Medhotels in a long- running battle against an HMRC bill for Toms and in doing so appeared to extend the legal concept of agency when it argued: “There is no reason why an agent should not be able to fix its own commission.” Neither ruling was likely to put the issue


of VAT to rest.


Summer holiday pricing The perceived high prices of holidays in July and August when all state schools in England and Wales close for summer triggered an online campaign for government intervention and to demands that school holidays be staggered. Research by TNS found strong


agreement among consumers, especially parents, with a suggestion that travel firms “hold parents to ransom” with prices in school holidays (charts, page 39). More than half (57%) agreed strongly and barely one in 10 disagreed even ‘slightly’. Almost half also agreed strongly with the idea of a government-imposed price cap. But only one-quarter showed the same support for staggering school holidays.


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