£1 per passenger charge – CAA starts ATOL reform consultation

The Civil Aviation Authority has started consultation on proposals to replenish the Air Travel Trust Fund and reform ATOL bonding through the introduction of a £1 ‘Consumer Protection Charge’.

Under the CAA proposals, ATOL holders would collect the £1 charge from each passenger when booking to help build up a £250 million fund to enable bonding to be removed.

A consultation document sets out the CAA’s views on the potential reduction in regulatory burden that would arise from a reform of bonding. It also outlines the principal issues associated with such a reform and its preliminary views on how these might be tackled. 

The authority said the emphasis of the consultation is on simplification – the current system based around bonds is complex, and the CAA considers that a reform of bonding will bring “significant de-regulatory benefits” to tour operators.

CAA consumer protection group director Richard Jackson said: “We believe that a reform of bonding provides an opportunity for licence holders to reduce their costs.

“A £1 per passenger charge will need to be introduced for three to four years to replenish the Air Travel Trust Fund, irrespective of any proposed reform.  We propose that the £1 charge remains in place for a longer period and be used to build up a new fund to enable bonding to be removed.

“If bonding is removed, there is considerable scope to simplify ATOL but at the same time it is vital that we ensure there are sufficient safeguards in place to prevent any disproportionate increase in the costs of failure, which will be met by the new fund. 

“We have therefore included proposals on how the CAA might adapt its approach to licensing without bonds, in particular through targeting higher risk groups.”

The CAA is distributing its paper widely to the travel industry and to other interested parties, and is asking for responses by May 19. 

A second formal three month consultation, with a Regulatory Impact Assessment, will take place during the summer on draft legislation dependent on the outcome of this initial phase.

The Government announced last autumn its decision not to proceed with the CAA’s recommendation to extend financial protection to all air travellers departing the UK. Operators voiced concern that as a result they would continue to bear greater regulatory costs than their airline competitors and consequently the government asked the CAA to consider whether the current system of bonding might be replaced with a less burdensome way of meeting operators’ obligations to consumers. 

A copy of the consultation document can be obtained from the ATOL website at www.atol.org.uk

Report by Phil Davies