The Civil Aviation Authority (CAA) has pledged it won't come down hard on companies slow to comply with new Atol Regulations which come into force today.
But CAA head of Atol licensing Andy Cohen (pictured) said businesses will have to show they are taking steps to comply.
Cohen said: "We won't come down with an iron first. The emphasis now is on education and will remain so for a period. Our emphasis for the next five months will be on education."
However, he said: "If we see people blatantly disregarding the regulations after they have had adequate opportunity to restructure their business or comply - if we come to July and see a company blatantly disregarding the regulations - then we have to look at enforcement action."
The new Flight-Plus Atol for sales of airline seats plus accommodation or car hire applies from today, meaning many travel agents need a licence for the first time. However, the CAA and Department for Transport (DfT) have declared May a 'transition period', allowing additional time to comply.
Cohen warned companies that do not take action could lose out if a supplier fails.
"If there is a failure of an Atol supplier and there has been no effort to comply with the regulations after the period of grace, the Air Travel Trust policy will be to refuse to pay a company's claims," he said.
He confirmed: "The period of grace is one month."
Cohen spent the weekend at the Advantage Travel Centres conference in Malta with a team of CAA representatives advising Advantage members on compliance.
He told Travel Weekly: "We're in a better place than I thought we would be at this stage. Compliance has exceeded our expectations thus far.
"All the associations and consortia are highly knowledgeable and helping their members. The major tour operators are preparing agency agreements. We're on course with having Accredited Bodies in place.
"Everyone is aware of what they need to do. Everyone is working tremendously hard behind the scenes."
Cohen said any problems "revolve around smaller firms which may not have engaged in the process and are not aware of the changes they need to make".
"They may not need a licence, but still need documentation in place. They need to decide whether to continue to sell holidays that are not packages."
Cohen described last-minute changes to the reformed Atol Regulations by the DfT as "just dotting Is and crossing Ts". He said: "It's purely administrative - adding a word missed out. It does not change anything."
The Changes to the Atol scheme do not go far enough, according to the Transport Select Committee.
In a report issued today, the committee says holiday sales by airlines should be included and more clear information provided for consumers. It also calls for any future reform to be funded by the travel industry.
The MPs argue that information is "patchy" for passengers who book flight-only and highlight the fact that travel firms who act as 'agent for the customer' will remain outside the scheme.
Committee chair Louise Ellman MP said: "The changes are unfair to some consumers and to sections of the travel industry.
"Information can be unclear and protection is patchy for passengers who book flights only, and holiday sales by airlines or some types of travel agent (agent for the consumer) remain outside the scheme."
The MPs call on the CAA to work with the airlines to develop a code of practice providing information for all consumers and distinguish between consumer protection and repatriation cover.
They also demand the government undertake research into consumers' views on whether the scheme should be extended. Finally, they suggest Atol Protection Contributions be linked to the value of the holiday booking, instead of the current £2.50 flat rate.
Aito welcomed the views of the select committee, the association's director for industry issues, Noel Josephides saying: “We see the introduction of the new Flight-Plus Atol as merely the first step towards extending the cover provided to the consumer and levelling the playing field between companies selling the same products.
"Those companies outside the constraints of Atol regulation yet offering similar travel arrangements have been allowed to grow and prosper at the expense of their heavily-regulated counterparts – Aito members and others – as, we are glad to see, the Committee recognises.
"However, Aito doubts that research with consumers, as suggested by the Transport Committee, will clarify the direction of further Atol reform measures.
"Consumers should automatically be protected because they will usually be blissfully unaware of the risk they are taking when driven to seek the cheapest deal in the current economic climate, no matter how much time and money is spent educating them.
"Understandably, it’s only when they lose their money or become stranded abroad that they realise the heavy financial penalty that accompanies inadequate financial protection.”
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