Dynamic packaging: The facts about Atol

Dynamic packaging: The facts about Atol

Atol reforms will have wide-reaching consequences for travel agents. Read Emily Ashwell's short guide to make sure you know what to expect.

Agents who sell dynamically, bringing together separate flights and accommodation to make a holiday, face dramatic changes to the way they work when reforms to the Atol scheme come into play this spring.

The Department for Transport and Civil Aviation Authority (CAA) this week delayed the deadline for adherence to the new regime by five months until October 2012, but the reforms will still be introduced in April.

The key requirement is that agents selling dynamic holidays will for the first time require a licence – specifically, a Flight-Plus Atol – in the same way as a tour operator.

Flight-Plus refers to the sale of a flight plus a room overseas and/or car hire or other components of a holiday – the kind of sales frequently referred to as ‘dynamic packages’. However, unless you intend to sell a package in the legal sense defined by the Package Travel Regulations – which makes the ‘travel organiser’ liable for anything that goes wrong – it is better not to refer to ‘dynamic packages’ and call them Flight-Plus holidays instead.

There are three key changes: the introduction of the Flight-Plus licence, a requirement to have Agency Agreements with suppliers, and the need to issue Atol Certificates to customers at the point of booking.

Agencies won’t need to have an Atol, but they will no longer be able to sell a Flight-Plus holiday without Atol cover unless they sell in a quite different way – as an ‘agent for the consumer’. Abta believes being an agent for the consumer will be sufficiently hard that few people will do it.

Every agency will need legal agreements with all its suppliers that define the commercial relationship between them. And every agent will need to know how to issue an Atol Certificate, of which there will be three types.

There are costs attached to this. Chris Photi, a partner at accountancy firm White Hart Associates, expects even a small agency to incur £1,500 in legal fees to bring it wholly into line.

Travlaw partner Sarah Lacy points out: "The time period between knowing the detail and implementation is going to be short." Agents need to work out what Atol protection they need or whether to act simply as agents and sell tour operator products. Alan Bowen, legal adviser to the Association of Atol Companies, says: "These are questions agents should ask now."

Is your Atol protection sufficient?

How many Flight-Plus holidays does your agency sell? If you intend to continue selling these holidays and your firm does not have an Atol, it needs to organise Atol cover.

Agencies that have a Small Business Atol will need to consider whether this is sufficient once Flight-Plus holidays are included.

Lacy says: "Independent agents who have not needed an Atol until now will need to apply for one if they fall into the scheme as a Flight-Plus Arranger."

The Atol scheme offers financial protection to consumers and new licence-holders must provide a guarantee against going out of business in the first four years they hold a licence by providing a bond or buying insurance or processing payments through a certified trust account. This last option is the cheapest but means agencies are not paid until clients complete their holidays.

An alternative option will exist for agency members of ‘Approved Bodies’, which will provide Atol cover on members’ behalf. The agency consortia are likely to offer this or a similar option. However, the requirements are "onerous", according to Lacy. Bowen says: "You should not assume there will be an Approved Body to provide cover for you."

How far-reaching will the changes to agency paperwork be?

The wording on booking conditions, receipts, invoices and agency agreements will all have to comply with the new regulations.

These require all agencies to have written agreements with the suppliers, or principals, whose products they sell. The agreements must be based on the CAA’s Schedule of Agency Terms and make clear who has responsibility for what in the event of an insolvency.

Paperwork passed to consumers will need to state clearly in what capacity the agent is acting, and publicity material will need to be amended in line with the Atol requirements. The CAA plans a consumer campaign late this year to raise awareness of the Atol scheme, so expect clients to become more conscious of financial protection in future.

Photi says: "The problem smaller agencies will have is that their terms and conditions and contractual agreements will vary. They will need wording that applies if they act as a retailer selling a package with full Atol protection, a holiday with Flight-Plus protection or if they sell individual components."

How far will business systems change?

This depends on whether agencies already have an Atol and how much information they currently collect at the time of booking. If an agency will have Atol cover for the first time, it will mean a substantial change to reporting systems. Atol-protected bookings must be reported, typically quarterly.

Bowen says: "Agents with an Atol will have to tell the CAA the value of the holidays they have booked and when clients are departing."

Agencies without an Atol will still need to record and report on the number and type of Atol Certificates they issue.

How will the new Atol certificate work?

An Atol Certificate must be issued at the point of booking for protected sales. The CAA will provide an electronic template for printing three types of certificate – for package holidays, Flight-Plus sales and flight-only. The certificate for Flight-Plus bookings will need to show passengers’ names, list what is protected, detail the prices and provide booking references for each component.

A separate Schedule of Information, primarily issued by tour operators, will allow details of holidays to be updated where it’s not possible to finalise every detail at the time of booking.

An agent who sells car hire to go with an Atol-protected package holiday will create a Flight-Plus booking that requires separate Atol cover for the ‘car plus holiday’, and this will need to be clear on the Atol Certificate.

Full details of Atol requirements can be found at caa.co.uk


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