BUSINESS NEWS 2021 Atol Reform consultation last week. Ian Taylor reports on the industry’s views
Bonding: ‘Yes’ to choice, ‘no’ to compulsory bonds
Atol holders have less enthusiasm for a return to bonding as the mainstay of consumer protection than they do for a compulsory move to trust accounts. But a majority of Atol holders
backed a CAA proposal that they be allowed to choose the form of financial security they use – the so-called ‘tailored’ option in the Atol Reform consultation – which could include bonding. This would see the CAA set the
level of funds requiring protection and allow Atol holders to choose the form of security to suit their business – by segregating funds, bonding or a combination of the two. The CAA summary of Atol
Reform consultation responses reported the majority of Atol holders considered the CAA should not mandate the use of bonds, with “more opposed to mandatory bonding than mandatory segregation”. Bonds were the main form of
financial security required of Atol holders up to 2008 when the Atol Protection Contribution (APC) was introduced. Since then, bonds have
APC: Respondents support shift to variable rate
Most respondents to the CAA’s Atol Reform consultation considered the Atol Protection Contribution (APC) on holiday bookings should move from a flat rate to a variable one. But they disagreed about how the rate should be calculated.
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been required solely of new Atol holders – for the first four years of business – and those the CAA judges to pose a financial risk. The consultation found concern
that “the lack of competition” in the bonding market would “financially disadvantage” Atol holders. There was doubt about the viability of the bonding market “particularly for larger operators”, and the requirement for additional capital to support bonds “was seen as restrictive and damaging”. However, a minority noted
bonding “was effective prior to 2008”. The CAA noted “a number” of respondents favoured a mix of
“Some considered this would
lead to a fairer system in which financially sound Atol holders are not subsidising riskier financial practices,” according to the CAA. It proposed moving to
a variable rate calculated on the basis of an Atol holder’s risk, the value of a holiday, or a hybrid model taking both risk and value into account. The CAA noted the hybrid
bonding with segregation of funds, but that “a significant number” of these did not agree with either. It did not indicate how many opposed a choice but said respondents which did considered it “would create excessive complexity”. By contrast, “the vast majority”
of Atol holders considered different approaches “appropriate depending on the size of Atol holder”. However, the integrated airline
groups “did not consider the size of organisation should be taken into account”, while “smaller operators argued they should not be treated the same [since] large operator failures had a [more] significant impact”.
model received most support, although no model attracted an overall majority. The “integrated groups” preferred a risk-based model, while a majority of Small Business Atol holders (SBAs) favoured a hybrid model. There were concerns
about the complexity of a hybrid model “and whether the CAA could create a
sufficiently clear, transparent and fair hybrid model”.
Monarch’s collapse in
2017 left more than 100,000 passengers stranded abroad
Agency terms: CAA to phase in small changes
The CAA will proceed with small changes to agency terms and APC collection as outlined in the consultation, but not all immediately. The proposal to amend
Agency Term 11 will go ahead so that future changes to agency terms automatically apply to all agency agreements, meaning Atol holders won’t have to update and reissue their agreements with agents upon every change. The “vast majority” of
respondents agreed this would be beneficial. However, for the change to come into effect, Atol holders will be required to reissue all agency agreements, so the CAA will postpone imple- mentation until the extent of any other changes to agency terms due to Atol reform are clear. The CAA will go ahead with
a proposal to require Small Business Atol holders (SBAs) and franchise members to submit APC returns quarterly, the same as standard Atol holders. The requirement will come into effect in November.
Respondents in favour of a
risk-priced APC argued “larger and riskier” companies should pay more. Some “strongly rejected” a value-priced APC, as it could “unfairly penalise secure, high- value and high-margin operators”. Travel industry associations
favoured a risk-priced APC. Consumer bodies were split. None favoured a flat rate but there was concern at the transparency of such a model and how consumers would interpret varying rates.
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PICTURE: Shutterstock/jremes84
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