The levy on package holidays that underwrites consumer financial protection will rise in October from £1 despite bitter opposition from the trade.
The Civil Aviation Authority will launch a six-week consultation on an unspecified increase in the ATOL Protection Contribution next month.
The rise follows the collapse of XL Leisure Group in September, with the cost of repatriating and refunding customers estimated at £80 million by administrators – although the CAA believes the bill will be lower.
CAA consumer protection group deputy director David Moesli announced the consultation this week at an e-tid breakfast briefing, although industry leaders have been aware it was coming since December.
The consultation is likely to offer several options, including a sharp increase in APC for 18 months from October 1 followed by a lower rate thereafter.
It is unlikely to suggest the levy rise to £5 as some in the trade suggest.
The news drew a hostile reaction, with Federation of Tour Operators director-general and ABTA head of development Andy Cooper saying: “A consultation is the wrong idea. The levy should not increase.”
ABTA head of legal services Simon Bunce said: “Whether APC remains good value at £2.50 or £5 is a serious issue.” He also accused the CAA of creating uncertainty among agents about whether XL claims would be paid, saying: “It suggests a bit of panic.”
APC was introduced in April 2008, when the CAA assured the trade a change in rate was unlikely for three years.
TUI Travel corporate general counsel Mike Bowers told the briefing: “The industry was given certain assurances when APC was introduced. We were told it was highly unlikely there would be a change in the first three years. We were told it was set at £1 after financial modelling that included the failure of a major operator combined with a deep recession.”
Thomas Cook group director John de Vial agreed, saying the industry had been told £1 would be “sufficient to build a sustainable fund”.
Many in the industry have argued for an all-flight levy. That was ruled out by Moesli, who said: “The government decided against an all-flights levy and we do not see that changing.”
The decision on the rate will be taken by transport secretary Geoff Hoon this summer.
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