TUI and Thomas Cook may drop ATOL cover on seat-only sales

TUI and Thomas Cook may drop ATOL cover on seat-only sales

The big two travel groups could drop ATOL cover on seat-only sales if the government increases APC, the consumer-protection levy on holidays.

Thomas Cook chief executive Manny Fontenla-Novoa signalled the companies that dominate the market will not take an increase lying down and planned to pass that warning to transport secretary Geoff Hoon at a meeting as Travel Weekly went to press.

Fontenla-Novoa said: "It is us and TUI Travel that pay for consumer protection - we probably provide 70% of it. Every £1 [on the levy] puts our costs up £5 million. When the government is bailing out the banks it is crass to ask us to pay £10 million so we bond the market."

Stripping ATOL cover from seat-only sales could cut the levy on about two million bookings going into the Air Travel Trust fund that underwrites protection.

The Civil Aviation Authority is preparing a six-week consultation on increasing the £1 ATOL Protection Contribution, amid speculation it may rise to £3 or more as the cost of XL Leisure Group's collapse last September threatens to take the fund close to its £60 million overdraft limit.

Fontenla-Novoa said: "APC should not increase. How can we pass it on? Our margins are under huge pressure. It's immoral when we have to be really tight on costs. I hope Geoff Hoon understands the pressure."

He warned: "We could remove seat-only [from ATOL cover]. We could look at de-packaging." He declined to specify how many sales might be affected, but said: "Taking out seat-only would be significant." Thomas Cook alone might remove one million sales from ATOL cover in this way.

ABTA is working furiously on a counter proposal it hopes to see included in the consultation document due in March. This would widen ATOL cover to any sale of a flight plus one or more travel elements

However, Fontenla-Novoa has reservations about ABTA's proposal, saying. "If all we do is increase the companies [in the scheme] and there are more failures, we will have to pay more."

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