Moves that are likely to see the government end its financial guarantee of the Atol regime are being touted as an opportunity to bring in a fairer scheme for agents.
The CAA has issued a call for evidence to the travel sector, and has held initial meetings with key stakeholders, as it looks at how Atol might be changed now the government’s Air Travel Trust (ATT) fund has cleared its deficit.
It is keen to take the liability of Atol off the government’s books as guarantor of last resort and has indicated it is looking for the industry to come up with ways for it to take on more of the responsibility for the scheme.
On Holiday Group chief executive Steve Endacott, who is among those to have been consulted by the CAA, said industry expectations that the £2.50 per passenger Atol Protection Contribution would be reduced once the ATT was in the black look forlorn.
He said the CAA had “moved the goalposts” but, having vigorously opposed the introduction of Flight-Plus Atol last year, he now believes there is a chance a new regime, underpinned by supplier failure insurance, can be brought in which does not threaten agents’ ability to act as agents.
Endacott was opposed to Flight-Plus because he believed it placed an undue burden of risk on travel agencies and described the current protection regime as a compromise and “messy”.
“The ATT is in the black and the government is saying it wants to remove the amount of money that it has to hold as guarantor of last resort from its balance sheet.
“Therefore, whereas we thought the costs would come down when it went into the black, the government has shifted the goalposts and the CAA is making a call for evidence. We could sulk or use this as an opportunity to deal with all the issues in one go.”
Endacott claimed the biggest threat to Atol from the Flight-Plus sector is an airline failure – as most holidays sold include a low-cost flight which is paid for up front – or from the collapse of an Atol holder due to the actions of an airline.
He pointed to all the major failures in recent times that had the biggest impact on Atol – XL Leisure Group, Globespan, Freedom Direct and Goldtrail – as falling into these categories.
Endacott’s proposal, which he has set out today on his blog, has four central pillars:
- Repatriation will have to continue to be offered by the government as this is uninsurable but would require a charge of only £1 per person to build up an adequate fund;
- If compulsory supplier failure insurance is aggregated by the CAA it will take away what is a ‘systematic’ risk for insurers covering airline failure if agents are taking out individual policies, bringing down costs to £1.50 per person;
- The CAA reduces the cost of insuring for airline failure by insisting on the use of relatively new virtual card payment technology by agents which would act as a buffer before insurance would have to pay out in the event of an airline failure;
- This saving could then be used by the CAA to insure the relatively low risk of pipeline money held by agents.
“The biggest weakness in financial protection is that Abta does not protect money, as my good friend David Speakman (Travel Counsellors chairman) tells people weekly,” Endacott said.
“If the CAA takes out a global policy they could easily insure the pipeline monies for any agent going bust because they are the CAA, not the individual agent.
“Although it’s quite frequent, the amount the insurer gets hit when an individual agent goes bust is not that much in relation to the premium.
“I think they could be covered within the £1.50 if people are using virtual cards. The other people who could do this are Abta, but as the CAA already has a scheme set up for collecting £2.50 and has a campaign to establish what Atol means why change it?”
Endacott said his plan only works for Flight-Plus and a different solution would have to be found for traditional tour operators.
And he believes it could work within the emerging European regulatory framework for leisure travel sales although it remains to be seen what the upcoming reform of the Package Travel Directive will throw up.
He conceded the proposal would mean the CAA would not be able to manage the collapse of an airline as they have been able to in the past so the failure takes place at a less damaging time of the year because insurers would withdraw cover from a struggling carrier.
“But that’s not the agents’ problem,” said Endacott. “The whole problem is we want to act as an agent, we do not want to be a principal.”
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